Nomad Foods Ltd. Q3 FY2024 earnings call

• Nomad Foods achieved solid top- and bottom-line results, with ninth consecutive quarter of organic sales growth and second of volume growth.
• Gross margin improved 390 basis points to 32.3% due to mixed tailwinds, productivity, and price net of cost benefits.
• Overcame ERP implementation challenges that initially affected service levels, with service levels now returning to near-normal.
• Returned to market share growth in the third quarter, driven by Must Win Battles and Growth Platforms.
• Undertook extensive innovation efforts across regions, such as launching new products in Western Europe and seeing growth in fish and prepared vegetables in Southeastern Europe.
• Southeastern Europe business performed well, with net sales up high-teens year-to-date.

Nomad Foods delivered solid top- and bottom-line performance in the third quarter. It saw ninth consecutive quarter of organic sales growth and second consecutive quarter of volume growth. Gross margin increased 390 basis points year-over-year to a new all-time quarterly high of 32.3%. Adjusted EBITDA rose 19% year-over-year, and adjusted EPS rose 28% to EUR0.55. Organic growth was 0.3% despite an estimated 2.5% headwind related to ERP implementation, with the underlying growth platform showing nearly 3% growth.

• Lowered full-year organic sales forecast to a range of 1% to 2% from the prior 3% to 4% due to ERP impact and a more conservative growth assumption.
• Expect full-year adjusted EBITDA growth within a 3% to 5% range and adjusted EPS of EUR1.72 to EUR1.77 (7%-10% growth).
• Fourth quarter is expected to have sequential sales growth acceleration but a lower profit margin due to seasonal factors and reversal of promotional timing benefits.

• ERP implementation caused service level issues and a temporary reduction in in-market support.
• Potential headwinds from retail negotiations in a subdued inflation environment.
• Currency impacts, particularly on fish due to dollar-euro movements, though hedging policy mitigates short-term impact.

Q: Andrew Lazar asked about visibility into 2025 growth and ERP learnings.

A: Stefan stated that frozen food is a strong category with programs delivering well, but refrained from giving formal 2025 guidance.

Q: Steve Powers inquired about ERP lasting impacts and S/4 HANA timeline.

A: Ruben responded that ERP did not alter plans, future waves of ERP implementation will be smaller, and lessons from the first go-live are being applied.

Q: Rob Dickerson asked about Q4 inventory build and macro consumer momentum.

A: Stefan said there is no need for inventory build, and the market is positive but mix is not fully normalized yet.

Q: John Baumgartner asked about execution changes post-ERP.

A: Stefan mentioned that AMP investment continues, and the flywheel model remains in place.

Q: Jon Tanwanteng asked about ERP costs and pricing.

A: Ruben said there were no material additional costs related to ERP, and hedging policy mitigates currency impact on fish.

Q: Peter Saleh asked about consumer health and A&P in 2025.

A: Stefan noted consumer improvement and that AMP investment will continue.