Nomad Foods Q2 Earnings Call Highlights

Nomad Foods reported second-quarter results that modestly exceeded its expectations, as price increases and productivity initiatives supported margins while retailer disruptions in key markets continued to weigh on volume and revenue. Chief Executive Officer Dominic Brisby said the company made progress on operational priorities during the quarter, including resolving commercial disputes, reorganizing its leadership and marketing teams, and advancing cost-savings efforts. He said the disruptions that affected the business earlier this year were largely resolved by the end of the second quarter.

Organic revenue declined 2.9% in the second quarter, broadly in line with retail sell-out trends, according to Chief Financial Officer Ruben Baldew. Volume declined 5.9%, primarily reflecting retailer disruptions that led to out-of-stocks and reduced promotional activity at key customers. Price mix contributed 3% to organic revenue growth, reflecting recently implemented price increases and a modestly favorable product mix. Baldew said first-quarter inventory de-stocking and order-timing effects had largely normalized during the second quarter.

Brisby said disputes in Germany and France were the principal drivers of the company’s recent market-share underperformance. During the most recent 12-week period, Nomad’s value share declined 90 basis points and volume share declined 75 basis points, while retail value sell-out fell 3.2%. However, the company said shelves have been replenished and promotional activity is resuming. “We have already begun to see improvements in market share trends,” Brisby said, adding that Nomad expects the recovery to continue during the second half of the year.

Adjusted gross margin increased 110 basis points year over year, as pricing and productivity more than offset inflation. Baldew said the margin performance also included some timing and phasing benefits that are expected to reverse later in the year. Nomad said it remains on track toward its three-year target of generating EUR 200 million in cost savings. Productivity initiatives have offset more than 60% of inflation year to date, according to Baldew. The company said its current approach differs from its actions during the 2022 and 2023 inflationary period. Whereas Nomad previously priced ahead of inflation to protect margins, its aggregate pricing this year remains below inflation, with productivity funding the difference. Management said the approach is intended to balance profitability with competitive positioning.