Nomad Foods Limited (NOMD) 7 Aug 24 2024 Q2 Earnings call transcript

Nomad Foods' second quarter earnings call for 2024 highlighted the company's solid top and bottom line performance, with volume growth of 1.6% and net sales increasing by 1.1%. This marked the first period of volume growth since quarter 3, 2021, and management expressed confidence in the company's ability to achieve profitable volume growth acceleration.

Volume Growth and Sales Performance

The volume growth was primarily driven by the company's strategic focus on winning Must Win Battles, which account for 50% of sales and have a significant impact on margins. The company's success in these areas has allowed it to allocate resources effectively, leading to an increase in market share and positive momentum. The positive volume inflection is expected to continue, with the company projecting a strong exit rate for the year.

Strategic Investments and Reinvestment

Nomad Foods has been investing in growth platforms, such as poultry in Germany and Italy, which have shown promising results. The company has also increased its advertising and promotion (A&P) spend by 30% year-on-year, demonstrating its commitment to driving category growth. These investments have been supported by favorable mix and supply chain productivity, allowing the company to reinvest in its growth flywheel while still delivering adjusted EBITDA growth of 5.3% and adjusted net income growth of 5%.

Market Conditions and Outlook

The European consumer environment remains challenging, but has shown signs of improvement, with consumer confidence inching up and price sensitivity easing. The company's category, frozen food, has generally outperformed total food in the last 18 months, with frozen food posting a robust 6% volume increase in the most recent period. This trend is expected to continue, with the company planning to lean in to drive growth with retail partners and invest in innovation.

Investor Questions and Management's Responses

During the Q&A session, investors expressed concerns over the company's organic sales growth expectations for the second half of the year. Management responded by highlighting the company's focus on Must Win Battles, growth platforms, and strategic investments in A&P. They also acknowledged the challenges in certain markets but expressed confidence in their ability to accelerate organic sales growth and maintain a strong profit performance.

Conclusion

Nomad Foods' second quarter earnings call underscored the company's strategic focus on volume growth, profitability, and investments in growth platforms. The company's ability to navigate the challenging market conditions and drive profitable growth is a testament to its strong leadership and strategic vision. With a clear focus on winning Must Win Battles and driving innovation, Nomad Foods is well-positioned to sustain momentum and deliver top-tier growth in the coming quarters.