Nomad Foods Limited Q2 FY2025 earnings call

Key Points

• ERP and Inventory: Admitted to being too optimistic with ERP implementation and having excess inventory in Q1; slowing down ERP program and team improving sell-in/sellout dynamics.
• Weather Impact: Q2 had extremely hot weather in Western Europe, affecting sales; working on better summer assortment and hedging for future years.
• Inflation: Inflation increased from 2.5% at year start to ~4.5% now, impacting gross margin; will take pricing where possible, with negotiation cycles mainly in Q1.
• SG&A Savings: Savings from overhead reductions, focusing on cost competitiveness.
• Innovation: 2024 had 10% of sales from innovation/renovation, expected to nearly double; focus on must-win battles, renovation, and new areas like snacking (e.g., protein bowls).
• Supply Chain: Closure of smaller factory in Nordics, with procurement and network optimization initiatives.
• Future Food Lab: Partnering with start-ups, focusing on foodservice, and developing pilot plants for faster innovation.

Guidance

• Full-year guidance range: 0 to -2%, with H2 between +2.5% and -1.5%. Midpoint assumes prudent Q4 assumptions due to weather volatility.
• Inflation assumption moved to ~4.5% due to hot weather and crop issues; will take pricing to recover in 2026 but focus on delivering 2025 commitments first.

Risks

• Weather volatility (heat waves) impacting sales and inflation.
• Self-inflicted issues: ERP implementation challenges and excess inventory in Q1.

Q: What gives confidence in guiding low enough given past misses?

A: Self-inflicted issues like ERP and inventory, weather impact, and taking a wider guidance range due to volatility.

Q: Midpoint of organic growth guidance and H2 outlook?

A: Midpoint assumes H2 between +2.5% and -1.5%, with Q3 recovery but Q4 prudent.

Q: Inflation pressures and 2026 pricing?

A: Inflation at 4.5% now, will take pricing in 2026 to recover, but negotiation cycles are in Q1.

Q: SG&A savings and innovation pipeline?

A: SG&A savings from overhead, innovation nearly doubling, focus on must-win battles and new areas.

Q: Supply chain optimization and future food lab?

A: Closure of Nordic factory, future food lab partnering with start-ups for innovation.

Q: Long-term weather positioning and capital allocation?

A: Assortment adjusted for weather, capital allocation includes buybacks and dividends, keeping flexibility.