Good day, and welcome to the Nomad Foods Second Quarter 2017 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Taposh Bari, Head of Investor Relations. Please go ahead.

Thanks, operator, and thank you all for joining us to review our second quarter 2017 earnings results. With me on the call today are Stéfan Descheemaeker, our CEO; as well as Jason Ashton, our Interim CFO. Before we begin, I would like to draw your attention to the disclaimer on Slide 2 of our presentation. This conference call may make forward-looking statements that are based on our view of the company's prospects at this time. Actual results may differ due to risks and uncertainties, which we do discuss in our press release and our filings with the SEC and this slide in our investor 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 for 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. Finally, please note that certain financial information within this presentation represents adjusted figures for the years 2016 and 2017. And all adjusted figures have been adjusted for exceptional items, restructuring and transaction-related items, and all comments from hereon will refer to those adjusted numbers. And with that, I will hand the call over to Stéfan. Stéfan Descheemaeker: Thank you, Taposh, and thank you, everyone, for joining us on the call today. We had a strong quarter -- second quarter with organic revenue growth of 3.5%, gross margin expansion of 90 basis points, adjusted EBITDA of EUR 79 million and adjusted EPS of EUR 0.23 per share. We continue to execute against our strategic agenda with a clear focus on growing profitable market share, generating strong free cash flow and allocating capital in a manner…

Thank you, Stéfan. Firstly, it's a pleasure to be here, and thank you for joining us all on the call today. Second quarter reported revenue increased 0.5%, while organic revenue increased 3.5%. Organic growth was driven by a 0.8% volume and mix growth and 2.7% growth from pricing. Reported revenue growth was offset by approximately 300 basis points of FX translation. This is slightly greater than our guidance of 225 basis points due to the strengthening of the euro versus the pound sterling in June. Slide 4 illustrates the sequential progression of organic revenue growth since the end of 2016, along with an overlay of Must Win Battle growth since we began to reprioritize our core portfolio in 2016. As we expected, strength in our core branded business was offset by declines in private label and industrial sales, which are a lower margin and being de-prioritized. As Stéfan mentioned, Q2 results benefited from the Easter shift but were also adversely impacted by unseasonably warm temperatures during the month of June. In that, we think it is reasonable to evaluate momentum in the context of the 2.2% organic growth we reported for the first 6 months of the year. On Slide 5, we show organic revenue trend across our 3 largest markets: U.K., Italy and Germany as well as the remaining countries in our portfolio. As Stéfan mentioned, Q2 trends closely resemble those in Q1, with Germany and Italy leading the way. Both countries are benefiting from much improved execution from a year ago, including the resolution of a customer dispute in Germany and the restoration of hakes fish supply in Italy. The U.K. continues to show steady progress against a dynamic market backdrop. Top line trends in our other markets also exhibited sequential improvement as a whole. Growth in France,…

[Operator Instructions] Our first question comes from Bill Chappell with SunTrust.

Stéfan, you just alluded to the warm weather and the ice cream -- I guess, higher ice cream presence in Europe over the summer. Did that have any meaningful impact in the quarter? Could the numbers have been actually better or was that just a risk going into it? Stéfan Descheemaeker: Let's say June, obviously, we do have to deal with the weather, but it was good for ice cream. It was less good for us. And the important thing for us is that there's normal -- with weather coming back to normal, July and August, obviously, we could see that we came back on track. But yes, we lost a bit of momentum in June, which is normal.

Okay. And then just talking a little bit more about Germany. Can you just give us some more color? I mean, obviously, 20% off of not that easy of a comparison compared to other countries was pretty outstanding. Was there one period that really drove that? And then how sustainable is that as we move to the next couple of quarters? Stéfan Descheemaeker: Okay. So maybe for you, Jason?

I think we're very pleased with the progress in net revenue management that we see in Germany with an increase in base sales. I guess the one word of caution is that we have the restoration or recovery of the customer dispute, which is in the base. But we are all pleased with the performance of the base in Germany.

And just as a reminder, what the number would have been excluding that? Stéfan Descheemaeker: We don't provide that kind of guidance, obviously, but it's -- overall, again, back to the -- to do what we've been doing with our core categories, we're very pleased, all are doing well. But obviously, that's what helped in the past. But at this stage, we're not coming with additional guidance.

Okay. And then last one... Stéfan Descheemaeker: 20% is indeed is, as such obviously, is partly inflated by these easier comps.

Got you. And last one from me. Can you remind us how much of a drag the weak harvest last year was on this year's numbers? And then kind of any early outlook on what this year's harvest look like? I assume it's fairly normal with the weather, so you should get back to kind of normal commodity cost. Is that fair?

As you pointed out, it's too early to say on our total harvest, the outcome. More to follow in Q3. We are overlapping a weaker comparison in 2016 due to that impact, which will be mostly in Q4. The quantification is [ lessons ] to get.

Our next question comes from Brian Holland with Consumer Edge Research.

So just a follow-up on Bill's question. So to the extent that the ice cream placement was somewhat of a headwind in June relative to the prior year, I understand that the weather has stabilized, but can you give us some context of what the weather situation is like this year relative to last year such that, that might be a tailwind for you guys in Q3? Or would you say it's kind of a net equal year-on-year? Stéfan Descheemaeker: Well, at this stage, it's difficult too. I would recommend you to check what people at Nestlé or Unilever said, if they said it was quite helpful for them, definitely for Unilever. But again, the only thing I can say is it has an impact in June and more to come, obviously, in July and August and, obviously, for Q3. But by definition, when you're getting out of a situation we have, you'll never know. But what I can -- the only thing I can say is overall, including June, by the way, we're growing our market share, which is ultimately the [ wheat fest ].

Okay. On revenue management initiative, obviously, positive that you guys are starting to realize those benefits here. I'm just kind of curious, maybe I thought that this was going to be maybe a little more weighed towards '18. Can you just give us a sense of kind of what state or frame where you are in the journey of realizing these management -- revenue management initiatives and realizing the benefits from that? I mean, is that a multiyear opportunity? Is that something where you're capturing a lot of it now and maybe that low-hanging fruit goes away into '18? Is there a way you can help us think about that? Stéfan Descheemaeker: Basically, that's -- to your point, it's a multiyear program by definition. But we all see -- or already seeing some result this year. The 2 things we have emphasized this year is, number one, is promotion efficiency, which is a really very deep program. So in other words, Brian, what we've been doing country by country by country, we've checkmarked all of our promotions and we've analyzed how they're doing, not only limited to sales, but definitely in terms of growth -- of gross margin, including cannibalization. And from there, you can really see country by country even retailer by retailer what you can do, what are the good promotions, what are the bad promotions and how we should reallocate money, not so much in terms of -- necessarily in terms of going down to the bottom line, but sometimes, you just have to reinvest. And so that's exactly what we're doing. And the situations are very different and interesting. Situations are very different country by country, retailer by retailer. And so we've been doing this exercise. We're very pleased. It's a multiyear exercise. It's -- what it does is it gives some sort of -- it is shaping our promotion program country by country by country. Let me give you an example. Spinach in Netherlands, for example, we've come to the conclusion that it's just very bad to promote this product because they, I mean, they basically, in terms of price elasticity, are just very, very bad. So what we've decided is we're taking the money and reinvesting behind top line. That's one example of the kind of things we're doing. But obviously, net revenue management is not going to be limited to this, so there will be other programs coming obviously in the coming years.

Stéfan, that's helpful color. And just last one from me. If we just look out to '18 and thinking about the way that you originally have framed the synergy realization on the Findus deal and to the extent that, that was tied to the Sweden plant closure, which has now happened, can you just sort of reaffirm for us where you stand as far as conviction in, not just with synergy benefits, but obviously the restructuring and nonrecurring investments behind that rolling off? Just kind of give us a sense of the visibility you have into that and why investors should remain comfortable that we get that big step function in '18?

Yes, there's no change in that picture and consistent with previous guidance.

Our next question comes from Steve Strycula with UBS.

So one point of clarification on the sell-in versus sell-out trend. I thought I heard you say that kind of like the Nielsen consumption trends were 5% in the quarter, which was above what your sell-in reported trends were. Can you just reconcile that for a second, just help us think through that? Stéfan Descheemaeker: The sell-in, sell-out, you mean?

Yes, that. Stéfan Descheemaeker: Sell-in, sell-out is pretty comparable, within the region of 5%, it depends country by country, obviously. But overall, it's -- the sell-out is very comparable to the sell-in, so no surprise from that standpoint. So that, obviously, our -- so our reported is 3.5%, which, as you know, the sell-out is 5%. Then within the 5%, you have different components country by country. And also, you see also, in terms of product, we're emphasizing the use of Must Win Battles. But as you know, so the -- I mean, we're doing pretty well with 8.5% in reported. So -- but the big thing is, to just mention, is that we're doing well with sell-out, number one. The base line is also very solid. So that's the second message. And we're confident with H2.

And Steve, just keep in mind, the 3.5% includes the non-branded part of our portfolio. The sellout data that we're quoting is strictly branded, which... Stéfan Descheemaeker: It's obviously good news for margin.

Right. That's helpful. And then Stéfan, can you help us unpack and frame the multiyear revenue opportunity here? I mean, congratulations on, like, inflecting the business positive. But how should we think about the past few years where -- hundreds of basis points of market share were lost, how do you think about the recapture opportunity and like the duration of your ability to out-comp the category? Just help us think through, like, are we in the early innings still? What drivers have you not activated or you have conviction that will continue to snowball forward? Just help us think about the revenue opportunity over the next few quarters, even years. Stéfan Descheemaeker: I will not give you necessarily some figures, but at least, I will give you some directions. And you, by the way, you're spot on. Our obsession is obviously to regain the market share that was lost over the last years. So that's the priority #1 for all operators. And I can tell you with what we have right now with this program, we'll be focusing on -- country by country, it's working. We can see -- let's not forget that we will obviously have achieved all, let's say, all Must Win Battles by the end of the year, which is fine. But you still have -- you see a lot of potential. Let's take the example of Germany. Germany was ahead of the game in -- compared to other countries. And you see still -- and despite some easy comps, you see the results. So we can see that it's a -- this program is obviously multiyear. So the combination of, number one, the real focus behind what we're doing, that's one thing. Second thing is, one thing we have put probably a bit behind us for the first year was NPD. So we had decided that we should renovate first, which was the right decision. Let's make sure that the products are in good shape. And then obviously, at some stage, we should resume the NPD program, definitely, in line with our core category. So that's really something that we obviously are going to use right now more and more. We are comfortable with the portfolio we have right now. The pipeline is in a better shape than last year. So that's the second thing. The third thing is, let's not forget it's a good industry. So it's doing well. So we're growing market share right now on the top of a solid performance country by country. And then, again, we think we still have a lot of new trends that we can tap further, and the countries and the center are working very actively behind this. But to your point, the obsession is to regain the market share we lost. We're in a good shape to become again -- the be again the market leader and the category leader. That's our job.

Great. And then one last question for Jason. How should we think about the magnitude of why operating expenses are up year-over-year the way that they are? I understand that there's -- the reversal of the bonus accruals for this year, given the execution of the business. But what else is in that number for it to be up so dramatically year-over-year? Can you walk us through that and particularly in the third quarter?

So as you quite rightly mentioned, there is the reversal of the bonus on indirects last year. There is also a shift -- a small shift of A&P from Q2 into Q3, which is driving that operating expense. [Audio Gap]

Following up on all the questions that have been asked in terms of the -- maybe some of the ice cream benefit drag that you experienced in June. It sounds like what you're saying is there is, hopefully, there's a little benefit; when it normalizes, you come back in July and August. And if you look at the -- your 4 regional buckets, really U.K. -- sorry, U.K., Italy, Germany and then other, and all of those have obviously progressed positively Q2 relative to Q1. And then we just kind of think about, I'm assuming the Must Win Battles are now around that 70% level and probably accelerate or continue to increase in the back half of the year. What prevents you from hitting the top end of your org sales guidance in this year? Stéfan Descheemaeker: Why we're raising the top line? Well, it's very simple. We can see, obviously, we're 8 months in the year, we see the results. We're pleased with obviously the first 6 months. As you know, we're back to normal in July and August. That's exactly what we said. And with that and the mix that we also have seen is we think it's probably more accurate to come up with a revised guidance. As simple as that, 8 months in the year.

Yes, I mean, I'm just asking it seems like the first half of the year did well. Q2 accelerated even if we back out the Easter shift. So like, is there anything in Q3 and Q4 that you still expect those to be maybe a little bit below what you're doing in Q2? Or are these Must Win Battles in core margin mix positive countries continue -- expect it to continue... Stéfan Descheemaeker: No, no. No, quite frankly, Rob, no. No, I think there is really nothing, I think we're going according to plan. We think the shape of our top line in H1 is going to be very much in line with H2 or vice versa. So nothing -- at this stage, we don't see anything specific, so no surprise.

Okay. And then in terms of the margin, is there any way to break out how much that was mix-driven, let's say, essentially by Germany and Italy relative to just volume and price, because like half of the gross margin benefit was just because there's this continued margin mix positive shift on a regional basis?

Yes, on the slide show... Stéfan Descheemaeker: Slide 6.

On Slide 6, yes, thank you, Stéfan, you can see the breakout of the drivers. So 1.4% is coming from mix and, as you can see, 1.8% from price and promo. And as you quite rightly said that parts of that is coming from the momentum in Germany and Italy, but also, as we landed the price increases in U.K. As we increased the promotions in Q1 to land that price increase, we have moderated those trade promotions in Q2, which is why you see the step-up in price and promo.

Okay. And then just last one from me. Stéfan, I know the expectation and part of the plan into '18 is hopefully to continue to gain distribution wins with the retailers. If you can remind us as we get into the back half of '17 now, when did the majority of those conversations occur with the retailers for '18? Or some of that occurs in '17, but part of that would really be early on in '18 for the rest of '18. Stéfan Descheemaeker: It's a global pattern. And again, why I'm saying global because each country and each retailer is a bit different, but global pattern is you're starting to negotiate your price in September, back to school for 2018. So kind of -- and obviously, somehow, the sooner the better. But overall, it's really September, October is the first part. And then in some countries, you have a second conversation in the second half, but it depends. But most -- let's say, consider that the real moment is Q3 2017 for 2018.

Our next question comes from Jon Tanwanteng from CJS Securities.

Any update on the CFO search, either philosophically who you're looking for; and second, when you might expect that to conclude? Stéfan Descheemaeker: Making progress, Jon, making progress. As you can imagine, it's a big priority for us and at the same time, we're doing extremely well with Jason. So no urgency as such, so let's make sure that we have ultimately the right CFO. So it's a priority, but it's doing well.

Okay, great. And just on the U.K. Do you need to do anything more on the pricing front there, given the continued FX headwinds you're still seeing? And maybe second, are the trade promotions you put in place to kind of mitigate that impact to the price increases rolling off now? Stéfan Descheemaeker: Yes. I think, overall, the program that was put in place by the U.K. team was extremely good. So they really tackled inflation, the currency-driven inflation last year very decisively from the start for the right reasons. And so number one, it was successful with the retailer, and we could see that at the end of the year. And then we can see in the course of Q1, Q2, now successful with the consumers. So that's one thing. Then prices and net earnings, sorry, obviously, you have to revisit every time you have a good reason how much you have to do this. So we also know that -- and it's not limited to us, as such. But the years of benign inflations are truly a bit behind us, so there will be some inflation in some of our commodities. But again, it's more food conversation overall in the industry than ourselves. And the sooner you prepare, the better you are. That's very simple.

Okay, great. And then just as a second part. Are those promotions that you put in place fully rolled off now? Or is there more to go in Q3? Stéfan Descheemaeker: Yes, it's easing. Promotion, obviously, you can't say it's never a click, but it's easing, obviously. You know it. The base -- as I said, the baseline in U.K. is very solid. And it's obvious that the overall direction is to reduce the dependency upon promotions. But at some stage, sometimes, for 1 quarter or 2, you have to change it and then back -- and coming back to normal. So we're getting back to normal.

Okay, great. And then finally, how should we think about the landscape and opportunities out there for M&A right now? Are you any closer than you were 3 or 6 months ago? Stéfan Descheemaeker: Oh, I would put it that way, we are well-prepared. I think if you have to keep something in mind, you have to keep something in mind is we went through this interesting time of, obviously, redeploying our top line. And with that, we learned a lot. We learned a lot in terms of ZBB, we learned a lot in terms of net revenue management, we learned a lot -- we're learning a lot in terms of lean manufacturing. And though that serves pretty well our purpose for the existing business right now, but it's going to be very helpful for the future. And for me, M&A is one thing. You have the dealmaking side, but you also have to how to just to make it work in terms of integration. And from that standpoint, we are in a much, much, much better shape than probably 1 year ago or 2 years ago. We have some -- we have big capabilities. And now it's time to obviously to consider what the program -- what kind of programs are. Well, don't expect from me, I mean, to come up with the names. I never did this in my life, and I will never do it. But we are prepared and we're working on it.

At this time, I would like to turn the conference back over to management for any additional or closing remarks. Stéfan Descheemaeker: Thank you, operator. So in summary, we continue to make good progress on the strategic agenda and have delivered in excess of our expectation thus far through the first half of the year. Looking out, we are well-positioned to realize further market share gains against a stable category backdrop. We're also strengthening our capabilities in the likes of ZBB, net revenue management and lean manufacturing. As we improve operating performance and free cash flow generation, we will remain focused on creating shareholder value through M&A, a strategic priority of ours. Thank you for joining us on the call today, and we look forward to updating you on our progress in November.

That does conclude today's conference. Thank you for your participation.