Nomad Foods Ltd. Q4 FY2024 earnings call

• Nomad Foods had a strong finish to 2024 with volume-driven organic sales growth and margin expansion, achieving 9 consecutive years of sales and adjusted EBITDA growth. - The company has a portfolio of iconic brands, is included in the Annual Dow Jones Sustainability Europe Index for the fourth consecutive year, and has a people advantage with an reshaped organization. - Focus on Must Win Battles (four category combinations critical to success) and strategic growth platforms like poultry in Italy (retail sales up 98% YOY in Q4 2024, market share grew to 50%) and Germany, and potatoes in Belgium (became category leader), France, and UK. - Innovation jumped from 4.2% in 2023 to 4.8% in 2024, expected to exceed 5% in 2025, and renewal rate to double from high single digits in 2024 to mid to high teens in 2025.

For the fourth quarter, net revenues increased by 4.3% to EUR793 million, with organic growth at 3.1% marking the 10th consecutive quarter of organic growth. Full-year revenue grew 1.8% with organic sales rising 1%. In Q4, gross margin was positively impacted by 40 basis points of favorable mix and 160 basis points of productivity. The full-year gross margin rose to 29.6%, nearly reaching the 30% peak COVID gross margin achieved in 2019.

• Expect organic sales growth of 1% to 3% and adjusted EBITDA growth of 2% to 4% in 2025. - Raised full-year adjusted EPS range to EUR1.85 to EUR1.89 from EUR1.81 to EUR1.85. - Continue to expect full-year adjusted free cash flow conversion of at least 90%. - Anticipate organic sales to modestly decline in Q1 2025 due to timing dynamics like later phasing of Easter.

• Potential impacts of inflation and currency fluctuations on cost and pricing. - Ongoing ERP disruptions (though less significant in 2025 compared to Q3 2024). - Possible tariffs and their potential impacts on seafood sourcing, though not currently seen as major risks.

Q: What is your 1% to 3% organic sales growth forecast for full year '25 predicated on?

A: Predicated on low inflation environment (1% category growth), portfolio strength (two thirds poultry, fish and vegetables growing nicely), commercial flywheel working, innovation around 5%, and limited ERP disruption compared to Q3 2024.

Q: How would you expect sort of the price/mix piece to come in now that you're two months through the first quarter?

A: Volume remains important, lower inflation seen, but how price comes through is still to be seen; currently see volume and bit of pressure on price, with price possibly coming back throughout the year.

Q: How much of the stepped up innovation and renovation activity is focused on existing must win battles versus new growth platforms?

A: Mostly focused on must win battles (50% of business), but growth platforms (north of 100 million) are growing fast with lift and launch, taking proportionally bigger part but applied to smaller part of business.

Q: What's the status of the enterprise wide transformation and efficiency benefits?

A: Charges taken in quarter were sizable, aiming to bring down run rates, going slower, smaller, and simpler with efficiency gains possible in next quarters and years through factory optimization and supplier rationalization.

Q: Are there any repurchases assumed in the EPS guidance for the year?

A: Not assumed, share count assumed flat with some shares issued for internal programs, additional buyback could be tailwind, but EPS may have headwind from floating interest rates.

Q: Thoughts on potential tariffs from the US and impact on European markets?

A: Hedging strategy doesn't see big impact on 2025 from dollar strengthening, don't export to US, don't import ingredients from US, no major tariff impact foreseen currently, but have diversified fish sourcing strategy.

Q: Color on overall consumer environment in Western Europe?

A: Inflation is easing, private label is losing some market share, frozen category is resilient, and situation is slightly improving though taking time