Nomad Foods Ltd (NOMD) 2023 Q4 法說會逐字稿

Greetings and welcome to the Nomad Foods fourth quarter 2023 earnings call (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Mr. Amit Sharma, Head of Investor Relations for Nomad Foods.

Thank you.

You may begin.

Hello, and welcome to Nomad Foods fourth quarter 2023 earnings call.

I'm Amit Sharma, Head of Investor Relations, and I'm joined on the call today by Stefan Descheemaeker, our CEO and Samy Zekhout, our CFO.

By now, everyone should have access to the earnings release for the period ending December 31, 2023, that was published at approximately 6:45 AM Eastern time.

The press release and investor presentation are available on Nomad Foods website at www.nomad foods.com. This call is being webcast and a replay will be available on the company's website.

This conference call will include forward-looking statements that are based on our view of the company's prospects, expectations and intentions at this time.

Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and in our investor relations presentation, which includes cautionary language.

We will also discuss non-IFRS financial measures during the call today.

These non-IFRS financial measures should not be considered a replacement and should be read together with IFRS results.

Users can find the IFRS to non-IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website.

Please note that certain financial information within this presentation represents adjusted figures for 2022 and 2023.

All adjusted figures have been adjusted for exceptional items, acquisition related costs, share-based compensation and related expenses, as well as noncash FX gains or losses.

Unless otherwise noted, comments from here on will refer to these adjusted numbers.

With that, I will hand you over to Stefan.

Thank you, Amit.

I would like to begin by offering a few highlights from our solid fourth quarter and full year results.

I would then offer a few comments on our accelerated growth outlook, the health of the frozen categories before handing it over to Samy for detailed review of our quarterly financial results and our initial 2024 guidance.

Nomad Foods delivered another quarter of solid top and bottom line performance.

Fourth-quarter organic sales increased by 1.9%, our sixth consecutive quarter of positive organic growth as of volume trends improved sequentially in each month of the quarter.

Quarterly and full year gross margins improved substantially, and we continue to generate strong cash flows, enabling us to initiate quarterly cash dividend.

I'm proud of our team to enable us to continue our interrupted track record of top-tier financial performance and finished 2023 with record high annual sales and EBITDA.

I'm even more excited about building momentum as the key drivers of our long-term profitable growth begin to accelerate.

As the impact of challenging macros we see as we return to our typical operating cadence, we expect even stronger top and bottom line growth in 2024 and for many years to come.

Specifically, we expect 2024 organic sales to increase by 3% to 4%, including positive volume and share.

Adjusted EBITDA is expected to increase by 4% to 6%, EUR556 million to EUR567 million and adjusted EPS is expected to be in the range of EUR1.75 to EUR1.8, which implies 9% to 12% growth.

We expect another year of strong cash flow generation, cash flow conversion in the 90% to 95% range.

With that, let me provide a few highlights on our fourth-quarter performance.

Fourth quarter net sales increased by 1.4% as organic growth of 1.9% was modestly offset by unfavorable Forex.

Our volume mix declines improved sequentially from the last quarter and moderated to the lowest levels is it third quarter of 2022.

Fourth quarter gross margins improved by more than 160 basis points due to disciplined pricing, optimized promotions and continued focus on productivity.

Our full year gross margin also came in better than expected, even as we absorbed substantial COGS inflation, enabling us to continue to increase A&P investments behind our brands.

Adjusted EBITDA of EUR117 million and adjusted EPS of EUR0.32 per share, both came in ahead of expectations.

We generated nearly EUR174 million of free cash flow during the quarter and EUR300 million for the full year, one of our highest with cash conversion ratio of 109%, well above our targeted range.

A long track record of consistently strong cash flows is at the foundation of our effective capital allocation to enhance shareholder value.

To that effect, we initiated a quarterly cash dividend of $0.15 per share, a notable milestone for Nomad Foods and a testament to the quality and resilience of our business and our confidence in our ability to generate significant cash flows in the sustainable long-term growth.

At the retail sales level as reported by NielsenIQ of value sales for the 12 weeks period ending December 31, increased by nearly 2%, including sequentially improving volume and market share trends.

Our recent year over year, volume growth and share trends have already turned positive in many key markets, giving us greater confidence in delivering positive volume growth in 2024.

The frozen food segment in Europe remained healthy, underlying consumption in all core categories and key markets continue to grow with improving volume trends over the last few periods, even with the unprecedented level of inflation driven pricing in the last two years, frozen food remains highly relevant for most consumers.

Frozen food enjoy household penetration in our key markets in the mid to high 80% range and even more importantly, household penetration has remained largely stable even with the extraordinary pricing, the last two years and it's not that difficult to see why.

Frozen food categories align perfectly with a number of secular consumer trends, including convenience, taste, nutrition, sustainability, and remain highly affordable.

For instance, using of value packs and promotion family of five can enjoy a meal of fish fingers, waffles and peaceful around $10 in many markets, highlighting the tremendous value proposition for products offering a key consideration for consumers in the current environment.

We are positioning ourselves to capture a greater share of this growth by increasing our focus investments behind our biggest and most profitable opportunities.

Our total advertising and promotion spending increased by nearly 30% in the fourth quarter and a disproportionately large share of these investments were made against our top 20 must-win battles.

These high priority opportunities account for nearly half of our retail sales and even higher bigger share of gross profits.

Our recent trends in many of these opportunities are very encouraging and gives me great confidence in our revised growth plans as we look to 2024.

The significant ramp up in fourth quarter is the investments we continue with 2024.

Specifically, we launched our master brand campaign to drive greater affinity to our brands in the first quarter, to build an emotional connection to our brands and to remind consumers of the most relevant and loved aspect of the relationship with our iconic brands.

Our messaging will also focus on highlighting the stronger health claims of our brands to emphasize the naturalness and goodness of our products.

Given the increasing debate around obesity and ultra processed foods, along with driving the core higher A&P will also help reignite our innovation engine.

Historically, new products have accounted for nearly 5% of our annual sales, and it fell below that level in 2023.

We committed to regaining our innovation momentum and have an exciting pipeline of new products to be launched from the rest of the year.

I mentioned two of these innovation last week.

Iglo branded Mexican coated fish fillet in Germany and King's branded multilayer premium ice cream for the home occasion

[Adriatic].

We have planned a full spectrum of marketing support and retail activation behind both these innovations, along with our other new products in our pipeline.

As expected, majority of these, the difficult but necessary pricing discussions with a few of our retail partners, which I mentioned in our last call, well resolved successfully.

Retail environment remains dynamic, but we have successfully completed pricing conversations, majority of our markets and we remain on track to complete the rest over the next few months.

At the same time, we are optimizing our promotion spending and reality allocating resources where we see the largest potential impact.

As I mentioned in my comments at the CAGNY conference last week, we are investing in our growth capabilities, no data in new analytics to positions us for accelerated growth in 2024 and beyond.

These investments are meaningfully upgrading our retail execution.

We have better insights in a wider, more comprehensive revenue growth management toolkit to maximize profitable volumes.

These strategies are working, and I strongly believe that they position us to capture greater share of the frozen food growth in our markets.

Our increasing investments to drive back to the growth is underpinned by our productivity agenda, particularly across our supply chain.

The resilience and nimbleness of our supply chain during a period of unprecedented volatility is unmatched across the frozen food aisle, but I'm even more proud of the fact that we are accomplishing it while increasing our focus on driving greater efficiencies across our network.

We are optimizing our manufacturing and logistic network reducing complexities and establishing strategic relationship with key suppliers to reduce supply risk and generate procurement savings, of supply chain, delivered strong cost savings and the high cash flows in 2023, even as our service levels improve to over 98%.

We expect similar trajectory in 2024.

While on the topic of cash flow, as I mentioned earlier, we generated EUR300 million of free cash in 2023, our second highest annual cash flow ever.

Strong cash flows, our foundation of value enhancing capital allocation strategies we bought backed more than 6% of all shares outstanding in 2023, initiated quarterly cash dividends and adopted a new $500 million share repurchase program, highlighting the strength and flexibility of our balance sheet.

As we continue to execute a balanced capital deployment strategy intended to maximize shareholder returns.

In conclusion, we delivered record high sales and EBITDA in 2023 with improving margins and strong cash flows.

Our quarterly volume trends improved sequentially, positioning us to deliver positive volume and share growth in 2024.

We are increasing our growth investments to unlock the full potential of our attractive product categories and iconic brands, positioning us to deliver sustained attractive growth in 2024 and for many more years to come.

I'm highly confident of delivering our revised long-term targets of 3% to 4% organic revenue growth, 5% to 7%, adjusted EBITDA growth, 7% to 9% adjusted EPS growth and 90% to 95% cash conversion, which I believe we'll deliver superior returns for shareholders.

With that, let me hand the call over to Samy to review our fourth quarter results and our 2024 guidance in greater details.

Samy?

Thank you, Stefan, and good morning, everyone.

I am pleased to present another quarter of solid performance at Nomad Foods.

For the fourth quarter reported net revenues increased by 1.4% to EUR761 million.

Organic sales increased by 1.9%, while unfavorable FX impacted quarterly sales by 0.5%.

Our organic sales growth was driven primarily by pricing as we continued to benefit from pricing to cover inflation.

Our volume and mix was down 5.6% during the quarter, a marked improvement from the third quarter and our lowest volume mix decline seats quarter three, 2022.

Fourth quarter gross profit increased by 7.9% to EUR208 million, while gross margin increased by over 160 basis points from the year ago quarter to 27.3% due to better procurement and cost discipline, improving volume trends and contribution from pricing and favorable RGM execution.

Adjusted EBITDA increased by 3.2% to EUR170 million in the quarter as higher gross profit was partially offset by higher operating expenses.

Our adjusted operating expense increased by 14% from the year-ago quarter due to the step-up A&P investment as well as higher indirect expenses.

Adjusted net income declined by 9.4% due to higher interest expense from our last year's refinancing, while adjusted earnings per share of EUR0.32 declined by only EUR0.01 from the year-ago quarter as the impact from higher interest costs was partially offset by share buybacks.

At current euro-dollar spot rate, our quarter four adjusted EPS was USD35 per share.

For the full year 2023, net sales increased by 3.6% to EUR3.04 billion, including 4.9% organic sales growth.

Gross margin increased by nearly 50 basis points to 28.2%, while adjusted EBITDA increased by 2% to EUR535 million.

Full year adjusted EPS of EUR1.61 or $1.74, a decline due to higher interest expense from the refinancing of our debt.

During 2023, we repurchased more than 11 million shares of our common stock for nearly [$185 million] under our previous buyback authorization.

As Stefan mentioned, we now have a new $500 million share repurchase authorization.

We delivered yet another year of strong cash flow in 2023 with full year adjusted free cash flow of EUR300 million, driven by strong working capital improvement, higher EBITDA and favorable timing on certain receivables.

Full year and fourth quarter cash flows came in well ahead of our expectation as we continue to be highly focused on effective inventory management, cash collection to improve our working capital performance.

Specifically, full year working capital decreased by nearly EUR155 million more than offsetting a nearly EUR40 million increase in cash interest.

2023 CapEx of EUR82 million increased modestly from last year as we remain highly disciplined on supporting long-term strategic investments.

Given the strong Q4 cash performance, full year cash conversion came in at 109%, well ahead of our targeted 90% to 95%, maintaining a high level of cash conversion is paramount to ensuring the strength of our balance sheet and to continue to execute our effective capital allocation to deliver enhanced shareholder returns.

We paid our first quarterly cash dividend of $0.15 per share earlier this week, reinforcing our ability to generate strong, consistent cash flows and in our attractive long-term growth.

Turning to our guidance for 2024, We are pleased with our building top-line momentum as we enter 2024.

We expect to deliver net revenue growth of 3% to 4% adjusted EBITDA growth of 4% to 6% and adjusted EPS of EUR1.75 to EUR1.80 per share.

We continue to expect strong cash flow with cash conversion in the range of 90% to 95% range.

Our 3% to 4% organic growth in 2024 is expected to be relatively balanced between price and volume mix, including positive volume growth for the full year.

Volume trends are already beginning to inflect to positive growth in many of our key markets.

We expect continued sequential improvements in the first half and consolidated volume to turn positive in the second half.

We expect our gross margin trends to continue to improve in 2024 as we benefit from improving volume, greater focus on productivity initiatives and favorable costs.

Digging into inflation more specifically, we expect relatively flat inflation for the full year with lower season, putting costs offset by headwinds in some of other cost buckets, including vegetables.

As Stefan mentioned, we remain committed to investing behind our brands.

Overall, A&P spending increased by nearly 13% in 2023, and we have planned to an even greater increase in 2024, particularly in the first half as we drive strong volume and share performance in 2024.

At US dollar, euro exchange rates as of February 17, our adjusted EPS guidance translates into $1.89 to $1.95 earnings per share and implied 9% to 12% year-over-year growth as we lap the impact from higher interest cost in 2023 and continue to benefit from lower share count.

In terms of quarterly cadence, our top-line is likely to be largely in line with historical patterns.

However, the second half will account for a disproportionately higher share of our profit and earnings, given the timing of costs close to due to the balance sheet re-measurements and the timing of our A&P investment, particularly in the first quarter, absent of any strategic acquisition and given our strong cash flow, we remain committed to returning capital to shareholders through the recently instituted dividend and opportunistic share repurchases.

We have a proven track record of top-tier financial results and are even more excited by the opportunities we have ahead of us.

We are confident of delivering attractive growth at or near the top tier of our two peers in 2024 and for many years to come.

I will now turn the call over to the operator for your questions.

Thank you.

Thank you.

At this time we'll be conducting a question and answer session.

(Operator Instructions)

John Baumgartner, Mizuho Securities.

Good morning, thanks for the question.

I wondered the into Q4 gross margin, which I think was a bit better than expected and I understand you've got your sort of pricing inflation sort of matching better relative to last couple of quarters.

Can you walk through what drove that upside and how much of that was underlying cost efficiencies coming through, how much of it was cost inflation moderation relative to net pricing?

Yes.

Thank you, John.

I've truly effective.

We had a good performance in our gross margin of nearly 160 basis points from a quarter a year ago.

I would say the main driver were frankly, pretty much the same.

I mean, even though the spread was changed when you look at effective spreads at the beginning of the year end of the year because effectively we saw the pricing impact starting to effective rate down as we had private pricing in the base.

So a lot of it was coming from good discipline and better procurement.

So we clearly continue to benefit from the fact that there were some clearly stepped up and improvement in that area.

We had a higher focus as well overall on productivity and efficiency.

And that same moment, we had improving volume trend.

If you recall, we had implemented at the same time, a sharp and audience strategy to define a 50 some promotional intervention, but also effectively there were some specific stepped-up issuance in advertising that really boosted the volume, which if you reduce the impact that we had versus year ago.

So the volume element has a component that we need to into that program.

Okay.

Thanks for that.

And as a follow-up, looking at the volume mix, I think that came in a little bit lighter than we were looking for in the quarter.

I think you mentioned some one-time drag there.

But your bigger picture, can you walk through the non-measured channels, what we can't see in Nielsen, what you're seeing in the Nordics, what you're seeing in Asia and how that sort of evolves in 2024?

Thank you.

I think to your to your point, John, actually, I know Apos Nielsen is only capturing part of all of our businesses.

So it doesn't include your point Nordics, Swiss Adriatics, Ireland, and it does include some brands by the way, like on bases.

It doesn't include the -- for example in our foodservice and we have, as a bit of private label.

So when you see, let's say, quarter four in value, but value and volume are getting very close to each other

Now, actually what you see is a Nordic sense hasn't made any change to the whole picture.

So it's very much in line with the rest of the numbers.

Adriatics was the weather help definitely, so we're doing fine.

And you may remember Adriatics in Q4 is mostly frozen food as opposed to ice cream.

And it was a it was a business that was probably is less strong than ice cream, but we're making a lot of progress, so that's the main difference is not the so the Adriatic is a plus, I would put it that way.

Then in Q4, we also have a lot of movement between sell-in and sell-out.

So most of the time selling at the end of the year is lower than sell-out and then on top of that you have a food service, for example, this contribute nicely to us.

So overall, interestingly enough, when we see quarter four, I think between the Nielsen numbers in the final numbers in terms of selling data they're quite similar.

But I thought with the series of delta being at Adriatics selling foodservice.

And then if you want to have this -- on a monthly basis, same thing in January.

Yes, we are around to some extent,

And John, remember, two- third our business that are colored in Nielsen data and all the little bit of a dislocation, but I think directionally it's the right way to look at it.

Thanks, everyone.

Thank you, John.

Steve Powers, Deutsche Bank.

Hey, good morning, everybody, thank you.

There is a quote in the press release and sort of the tone of your prepared remarks talks about playing offense in 2024.

I guess maybe just a little bit more detail, if you could on the cadence of spending as you do that, and then also how quickly you expect to see returns on that spending and maybe in terms of the pacing of volume versus price as we go through the year.

Any perspective on that would be great?

Went to your point, I think we are we already started by the way.

We started end of Q3, we really started to we re-increase of O&P, Q4 was really a double digit growth and we have all the intent to keep going that way in the course of this year, even faster.

So overall, by the way, we think that it is going to grow even faster than those sales, which makes total sense.

And well, interestingly enough, you know, is it was absolutely crucial for us to be able to keep our gross margin so that we wouldn't be able to invest to reinvest behind the brands.

So that's starting together with other things, because again, A&P is one component, Steve, but there we have a more and more for all our must-win battles.

We have an integrated view what we call our flywheel, which is we basically A&P, it's also obviously a revenue growth management.

So where do we need to invest in pricing or in promotion?

Where how do we do need to do this innovation also pipeline is starting to build to be better after two years, which were more probably a bit more subdued.

So, we expect to see the gradual improvement turning to positive volume growth by second half of the year.

But it's not going to be linear guys, it's going to be steady, but it's not going to be linear So but overall, what we see is we are very confident that the growth trajectory is there to stay.

But again, combination of a good category to very good category.

We also are lapping obviously is very strong pricing and then overall on initiatives together with our brands.

Very good.

Makes perfect sense.

And Samy, you talked about, the openness to M&A, but at the same time, the extent that M&A doesn't present itself, we'll continue leaning towards cash returned to shareholders.

Is there a way to think about the parameters around that in terms of how much dry powder so to speak you want to preserve versus and how much is too much, and what's the trigger to cash return or share

Is there a level of cash on the balance sheet and is excessive, is there a leverage ratio that that's too low?

How do we think about balance of kind of waiting for the M&A opportunity presents itself versus them being proactive and capital return?

Yes, I think you will really guide you to a ceiling companies who was running shareholder recovering it from that perspective.

We've been using five-year (inaudible) activity, I mean, a good off, none of our early survival.

I mean there from a capital allocation standpoint, we focused historically on M&A and we've done, we've effectively moved forward and buyback.

As you have seen doing it last year, we are institutionalizing our dividend and we are clearly looking at all of these are these vital together and to be fair now that we have and to come back to your first question, that we are activating effectively a number of the levers that we know within our algorithm are contributing to stronger growth balance between volume and price.

I mean that's going to enable us to continue to fuel further cash and spending effectively a proper balance between buyback, the dividend, we will be effectively looking at opportunity in terms of M&A, for sure.

I mean, at this very stage, what we would want to do is to make sure that we maintain our leverage within the band, the operating band, which we have mentioned.

During the company presentation, which is our target range, is between 2.5x and 3.5x. And within that, we were trying to effectively use our cash to make the maximum return and from that perspective.

So M&A still on the math, I want to be very clear, but we have clearly opportunities, I mean, in the area of buyback.

And we as well, we have initiated a dividend there.

Well, it should just complementing what those two points were to Samy.

Everything obviously you nothing would be possible without free cash flow which is extremely strong.

So that gives us the whole thing gives us all the opportunities available and quite frankly, what you see the different opportunities, although between dividends buyback.

I think we've been very disciplined on that.

Then M&A, the integration, quite frankly, it's also something where all our acquisitions have been very successful.

So we have all the spectrum of what is available, but based on very, very strong cash flow.

Very good.

Thank you so much.

Thank you.

Rob Dickerson, Jefferies.

(multiple speakers) We touch on this a little bit last week at CAGNEY which is a great presentation, and I think there's a lot in there and also seems like there's kind of a lot kind of all go and forthcoming change occurring at Nomad kind of relative to history that it almost seems like now it's time to step into the next phase with respect to productivity and then the reinvestment cycle.

I just wanted to kind of give you another opportunity to kind of talk about is that your overall conviction on that top-line growth target because the 3% to 4%, frankly is not kind of what we would consider like a normalized category growth, our target relative to history.

I think historically, you've spoken kind of more to low single digit for two three.

So clearly seems as if there's a lot more confidence and conviction for a little bit faster growth and Nomad as we think forward, just probably over the next five years?

That's all I have.

Thanks so much.

Thank you, Robin.

You are right, by the way, I think, you know, it's a slightly different angle to start with the top line.

I think it's based on the series of elements.

First is leader by leader, we see that this category, which is a great category, frozen food is really starting to develop.

I think people more and more can see that, you know, the category as such is healthy, it's convenience, it's also sustainable, it's nutritious.

So it have taken all the boxes, and quite frankly, people are starting to see this.

So that helps a lot, not first piece, the second piece is, well, you know, after two years of, a lot of pricing and also with volume impact, we can see obviously that we want to be in a position to recoup part of the lost volumes.

We will also be very selective.

We don't want to regain order and order volumes, but frankly, with the that's why we have this concept of must-win battle that you're well aware of which has the best categories with the best margin.

So we we're going to be selected from that standpoint on top of increasing the algorithm to your point.

And then the third piece is yes, we're increasing O&P back-to-normal first.

And then last but not least.

Our pipeline of innovation last two years was a bit subdued.

Lot of reasons people were focused on cost of living.

Obviously, we were also trying to really tackle the whole it was more defensive.

Now definitely for the next years and you know that innovation takes more time, but the we have the ambition to really create a best-in-class pipeline of new products such as project as category leader.

And that's something probably we didn't do enough in the past and that we're going to do really absolutely with a with an obsession in the coming year.

So that's a combination of these elements by definition, there will be pluses and minuses, Rob, but that's the reason why we think we can increase or I'll go to your point from 2%to 3% to 5%.

Let's make it clear

Rob, if I mean, the one thing I'd like to emphasize that we took place last week was the fact that the big difference as well is in I think, Stefan, you do it, it is the integrated flywheel and we are really activating the most of the part of the flywheel together in a synchronized way with the mindset of driving better return in A&P one of proper price level is another one with RGM and promo.

At the same time, we're increasing our presence in our strategy in-store.

The combination of all of that is clearly working and it's working Q4.

So we have evidence and it shows in the improvement that we are seeing in Q4 and that's exactly what we're going to continue with the stepped-up investments we're making to the settlement of focus integration and making sure that we are activating all of the parts of the flywheel together, which will enable us together with productivity that is now frankly implemented across-the-board, enable us to deliver good top line that's going to affect the flow through into bottom line and a strong EPS growth moving forward.

Thank you, super.

Thank you both.

Really appreciate it.

Thank you, Rob.

Thank you.

(Operator Instructions)

Jon Tanwanteng, CJS Securities.

Hi, good morning.

Thank you for taking my questions and congrats on the nice improvements you're seeing there.

I was wondering if you could first address the competitive environment and how you see that evolved in the last quarter and then through Q1, are you seeing any response to your two new strategy at all, either from branded or private label competition?

Have you seen the price gap continue to close with the private label side?

I think it's a great question, Jon.

I think the company got room and remains about the same.

I think we first very pleased to have closed most of negotiations with the customers, which was a bit of a drag in Q4.

So that's helping a lot, and it's going to help version of gradually in some of our countries.

So what we private label price gap is still a bit wider than historical level, which is normal.

So we're not surprised by that and that's why instead of going down, drastically, are we more in terms of are we going more to surgical promotion intervention?

We've learned a lot with, though, with the revenue growth management.

We've invested a lot.

And quite frankly, the level of science that we've put together is read plus we mentioned an example last week in Italy in fish.

It's a great example where we see the results.

So it's a great investment so that the price gaps remain important.

But I think it goes just beyond that managing these gaps, we really focus now on highlighting why our brand is of a premium.

So we haven't done that enough in the last couple of years.

We know that and now we get into we ramping up or is the spend, which is a big thing, obviously, something that is a great answer to the private label and more long-term, obviously, innovation, which is about expected from a performance and from a category leader like us.

Got it.

Thank you.

And then I don't know if you addressed this earlier.

I apologize if I missed it, but did you mention how much capital allocation has built into your EPS guidance for the year and what the balance is weighted more towards if it is included?

So we have not mentioned any of that.

I think we just provided guidance, as I mentioned.

I mean, in your guidance.

John, $82 million in 2023 on CapEx

.

John Baumgartner, Mizuho Securities.

Again, thanks for the follow-up.

I just wanted to ask a bigger picture question, Stefan, if I can you mentioned kind of whittling down some of your focus brands or geographies in the must-win battles relative to a couple of years ago.

I'm curious what sort of went into that?

How did you decide how to whittle?

Is it certain categories, certain brands, our average turns change over the last couple of years.

So I'm curious to hear more about that.

And then related, you also talked about geographic expansions and cross-selling opportunities in markets where the brands are live, but not just in all the categories.

I'm curious as you pursue more of that cross selling going forward, how do we think about the incremental resource investment required because these aren't these aren't new brands and I imagine you really have leverage with local sales force and distribution?

Thank you.

I'll get this right to be well, I'll spend a bit more time on that one because I think it's kind of topic I love, which is the must-win battles.

You remember, John, we started in 2016 where we came to the conclusion that the company was not focused at all.

And it was absolutely time to focus behind the key categories per country and so because we didn't necessarily have all the money to go to behind 100% of our sales.

And by the way, strategies about deciding where you go into 4Q, you're going to allocate your resources is exactly what we did with Amazon.

But then we will decide to focus on A&P or innovation money or in-store activation in the off-highway is actually behind two -third of our categories based on basically growth potential gross margin and market share to make it simple.

And as a result, you know, I think this did this to third received, obviously almost everything And unsurprisingly, it grew much faster than the rest, something like about 5%, the rest went to 0%and sometimes even decline, which is absolutely acceptable.

We like the idea that we were very selective unsurprising after a few years, you know, these two-third came 90% and so on, then we're back to the square one, which is basically where are we going to reallocate our money.

And that's why we decide we are not going to be even more selective from beyond the best and brightest must-win battles.

And so we've decided to then deemphasize around 25% of our must-win battles to really focus on the best and brightest, especially in terms of sort of gross margin and then gross profit potential.

So that's what we're doing right now.

Just as a point, formation 2024 must-win battles represents around 50% of our sales and much more intense and more in terms of gross profit is 20 out of around 80.

So that gives you a bit of the idea what we're doing right now.

So it's a bit of this.

The value being we remain very logical and consequent with what we did in the past.

But again, with more resource at the same time as you know, investing buoyancy.

So you can imagine these brands are really going to receive more money because first, we go we know selected and on top of that, you will be increasing in the.

So that's a big boost for these categories.

The second piece about your concept of pollination, which is basically we have something which is unique in frozen foods.

We have a unique assortment when you think about all the different range of products we have across all different countries, 22 countries in Europe and at the same time, we were so unique to be present in all these countries.

So this combination allows us to see -- okay, fine, we not fantastic.

For example, we have a fantastic product offer greater efficient ships in the UK and we think and obviously consumers through this, we think it can work in France.

So with very little money, we started something like five, six years ago, and it has moved from EUR5 million to EUR40 million in six year, quite frankly, with very little A&P we showed you of the strength of the product obviously some have presented the right way.

So that's the best example of what this thing we can do, and there are many more.

So just focusing on this example efficiencies, we're going to do in Switzerland.

We're going to do it in that way is because people it's demonstrated that is the concept can work.

So it's definitely what I would qualify some sort of a, let's say, very low risk innovation when you think about it, because we're taking a product that exists in the country that is very, very successful.

And we're testing with the other countries adjacent or not, and we can move.

So you remove of the innovation process, which then the undergone that comes with the a certain level of failure in the voice, the voice normal, I think we substantially reducing this failure rate with this approach and as we said, think about it, fantastic assortment in an amazing number of countries.

Then you can see what was exactly the extent of this lift and shift you guys can represent for us.

Thanks Stefan.

Thank you, John.

Thank you, John.

Thank you.

Ladies and gentlemen, that concludes our question and answer session.

I'll turn the floor back, Mr. Descheemaeker for any final comments.

Thank you very much operator, thank you for your participation on today's call. 2023 was a good year, and I'm even more pleased with our good momentum as we enter 2024.

Nomad Foods team has shown incredible nimbleness and agility in the last two to three years and that I believe that we are now well prepared to deliver accelerated growth.

Our revised long-term growth iglo puts us amongst the top tier of our food peers, which combined with a very attractive valuation positions us to deliver superior returns for our shareholders.

Thank you very much, operator.

Thank you.

This concludes today's conference call.

You may disconnect your lines at this time.

Thank you for your participation.