Earnings Call: Q2 2019

Aug 8, 2019

Ed Foods' Second Quarter 2019 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Tapuch Spery, Head of Investor Relations. Please go ahead, sir. Great. Thanks, Janet, and thank you all for joining us to review our Q2 2019 earnings results. With me on the call today are Chief Executive Officer, Stephan Jeschmaker and Chief Financial Officer, Sami Zekhout. Before beginning, 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 are discussed in our press release, 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, which is available on our website. Please note that certain financial information within this presentation represents adjusted figures for 2018 2019. All adjusted figures have been adjusted for exceptional acquisition related and share based payment and related expenses, as well as non cash FX gains or losses. And all comments from here on will refer to those adjusted figures. Finally, users should be aware that 2019 figures have been presented in accordance with IFRS 16, the new standard for lease accounting. As such, certain financial metrics may not be directly comparable to 2018 figures. However, we have disclosed the impact of this change in the press release, where the impact on comparability has been deemed material. And with that, I will hand the call over to Stefan. Thank you, Sasol, and thank you all for joining us on the call today. Earlier today, we reported Q2 2019 earnings results and reiterated our full year guidance. Highlights from the Q2 include organic revenue growth of 3.5%, driven by 4% growth from price, offset by a 0.5% decline in volume and mix. Adjusted gross margin of 29.8%, reflecting a 70 basis point decline in the base business and 90 basis points decline due to the inclusion of acquisitions. Adjusted EBITDA of €98,000,000 representing a growth of 10% and adjusted EPS of €0.27 per share. We're pleased with our performance during the 2nd quarter, which represents the 10th consecutive quarter of organic revenue growth for our company. This trajectory of sustained growth has been fueled by the investments we've been making in our brands, our people and our capabilities, while also strengthening the long term portfolio potential of our portfolio. Growth during the Q2 was again led by our branded business, which grew 4.5%. Within our branded portfolio, our core, also known as our machine battle, grew 7%. We achieved growth in nearly every major core category, including fish fingers, coated fish, recipe fish, spinach and local machine bottles. We experienced publicly strong growth within our vegetable portfolio, which grew 6% during the quarter. This growth was driven by strong execution of Spinet products combined with a favorable response to prepared vegetable products such as our recently launched Veggie Power Innovation. Geographic performance during the Q2 was once again relatively broad based with most of our countries countries achieving growth. Growth was particularly strong in Germany, Austria and Netherlands with each achieving organic revenue growth above 10%. The UK, our largest country, delivered organic growth mid 5%, with strength in fish fingers, poultry vegetables and private label pizza. The UK also benefited from the launch of Green Cuisine, our new plant protein range, which began shipping in late March. Within the UK, we rebooted the Putz Stella Pizza brand during the Q2 by launching a new advertising campaign alongside enhanced product packaging features. As you may have seen in the Nielsen report, we experienced some temporary delivery declines in the branded pizza business early in Q2 based on our decisions to under promote and to build capacity ahead of the brand revenues. We're happy to see the strategy play out as expected with the branded pizza business returning to growth for the month of June. Staying on the topic of pizza, we recently began to test the good finance model outside of the European island. We are currently piloting the concept in Portugal under the Igloo brand, which actually sold pizza many years ago. We look forward to seeing the results of this test later this year. That was a summary of our 2nd quarter highlights. So let's now turn your attention to our outlook, both near and long term. Through the priority of our call, we're developing a strong foundation from which we can build on for years to come. Notwithstanding our performance to date, we continue to see significant headroom of growth within our core fish and vegetable category. Our core categories are margin accretive, have market leading positioning and opportunity for even greater presentation. The food industry is undergoing a significant product shift as consumers seek out brands with value on taste, but also on nutrition and on sustainability. We foresee to have a portfolio which plays directly into these themes. Our power brands, Finsus, Igloo and Birds Eye are known for providing families with high quality and great tasting meal solutions, which are convenient, nutritious and accessible. These brands have incredible awareness over decades with the potential to be even larger in size. As we prepare ourselves for the future, we are increasingly focused on evolving our core, which includes fish fingers, coated fish, seasoned spinach as well as developing new platforms, which play into the growing flexitarian movement. To do this, we will look to leverage the credibility of our brands and the Pan European scale of operations. Turning to Slide 5. Plant Protein is one of many exciting innovations in our pipeline. We're developing a differentiated range of meat free products through our green cuisine sub brands, using pea protein and leveraging our brands' habitation in this protein rich crop. Green Cuisine was launched in the UK earlier this year and is offering burgers, sausages and meatballs. Early feedback has been positive with excitement building further since our new groups have a bit better campaign, which began in late July and will run through early October. Another innovation success story is Veggie Power, a modern blend of vegetables boosted with healthy grain. These range loans in Portugal last year have since been expanded to a total of 5 countries across our portfolio with each market having its long local variation. Results have been very encouraging thus far, reinforcing the potential that we have in vegetables, diet dishes beyond peas and spinach. Green Cuisine and Veggie Power are two great examples of our innovation pipeline at Swartz and how we will look to build around our core. They illustrate a number of dimensions that our portfolio has in helping consumers maintain a more sustainable and nutritious diet while still offering superior quality and taste. Green cuisine provides families with the meat free product, which is healthier than most of our competitors, while veggie power provides an innovative way of increasing vegetable consumption. In summary, we're pleased with our 2nd quarter results, which have us on track to deliver 3rd year of growth in line with our long term algorithm. Our portfolio is well aligned with the future of food, and we look forward to playing a pivotal role in driving growth in both our business and our category. This will be through a combination of organic growth. We are demonstrating a sustainable model at work. M and A will also play an important role in due time. We have a strong Pan European infrastructure, integration capabilities and capital to pursue acquisitions which will be accretive to both earnings and shareholder value. With that, I will hand the call over to Sami to discuss the financial and guidance in more detail. Sami? Thank you, Stefan, and thank you all for your participation on the call today. Turning to Slide 6, I will provide more detail on our key Q2 operating metrics, beginning with revenues, which increased 10% to €538,000,000 driven by 3.5 percent organic revenue growth and 7 percentage points from acquisitions. Adjusted gross margin was 29.8 percent, declining 170 basis points year on year. Base business gross margins declined 70 basis points as improvements in volumemix and price and promotion were more than offset by cost inflation. Acquisition mix negatively impacted gross margin by 90 basis points and FX a further 10 basis points. These results were largely in line with our guidance and reflect the shift of Easter promotion from Q1 into Q2 as well as a more normal level of promotion this year versus the prior year. Moving down to the rest of the P and L. Adjusted operating expenses increased 4% year over year, primarily due to the inclusion of acquisitions. As a percentage of revenues, adjusted operating expenses improved to 14.7% from 15.5% in the prior year, reflecting acquisition synergies, expense discipline and phasing. 2nd quarter adjusted operating expense were slightly below our expectations due to phasing. Our spending plans for the year remain unchanged. Within operating expenses, A and P increased 1% and indirect expenses increased 5%. Adjusted EBITDA was €98,000,000 and as expected included a €4,000,000 benefit related to IFRS 16, the new standard on lease accounting, effective this year. Excluding these benefits, adjusted EBITDA grew 6% versus the prior year. Adjusted EPS was €0.27 for the quarter, declining 4%, reflecting the offering of 20,000,000 shares in March 2019. IFRS 16 did not have a material impact on EPS during the Q2. Turning to cash flow on Slide 7. We generated €87,000,000 of adjusted free cash flow during the first half of the year, as compared to €102,000,000 generated in the same period last year. Factors a working capital outflow of 68,000,000 a working capital outflow of €68,000,000 CapEx and cash taxes were both €17,000,000 dollars and cash on interest cash interest and other of $31,000,000 due primarily to the reallocation of lease payments from operating cash flow to financing cash flow as a result of IFRS 16. We achieved free cash flow conversion of 71% through the 1st 6 months of the year, below our long term annual target of 100%. This performance is partly a function of seasonality given the time of the year. With that said, we know we can do better on cash generation and have a series of action in place to drive stronger cash performance in the back half. However, given the seasonal nature of our cash flows, we do expect working capital to again represent a cash outflow in Q3 as is typically the case due to the timing of the harvest. We ended the Q2 with leverage in the high 2s, which provides us with adequate capacity to pursue our M and A agenda. As Stephane mentioned, we remain active on the M and A front and look forward to updating you in due course. With that, let's turn to Slide 8 to review our 2018 guidance, which is based on foreign exchange rates as of August 6, 2019. For the full year 2019, we are reiterating adjusted EBITDA guidance of approximately €420,000,000 to €430,000,000 and adjusted EPS guidance of €1.18 to €1.22 Full year guidance continue to assume organic revenue growth as a low single digit percentage rate. Based on current exchange rates, we expect FX translation to represent approximately 70 basis points of drag on reported revenue in the Q3 and 60 basis points for the full year. We expect adjusted EBITDA growth in both Q3 and Q4 with relatively comparable year on year growth rate in each quarter. That concludes our remarks. I will now turn the session over to Q and A. Thank you. Operator, back to you. Thank And we'll take our first question from Steve Strycula of UBS. Hi, good morning. Good morning, Sumit. So a quick question on revenue and I have a quick margin follow-up question. So Stephane, you mentioned that the core is doing quite strong, up 7% in organic sales. Just was curious as to what are some happening in some other pockets of the portfolio right now with that have further room for improvement, whether it's pizza or some of what you would call that are not much win battles? Good point, Steve. I think let me again reiterate what the starting point for us. Obviously, machine battle is pretty key for us. And you may remember that all in together, even including the decline of fees because we didn't have enough fees due to the ban harvest last year, we delivered plus 7% with machine paddles. For a total of 3.5%, 3.0%, it means that obviously some other things are doing less well. But again, part of that is a deliberate choice, which is let's focus on obviously our key categories where we have leading positions, where obviously our gross margin is the highest, and that's exactly what Boston bottles are. So orders, obviously, on the non branded side is one thing. Obviously, foodservice is another. But even within the brand side, Steve, we also have made some deliberate choices. For example, in Norway, we had very low gross margin profit like Redfish. And we just have decided that it was time to delist it because it was just not good. So it had an impact in terms of sales, but quite frankly, it's really something that we are it's a deliberate choice that we are making. Does it mean that we are perfect and there are other things that we could do better? Absolutely, you're right. So in terms of secondary battles, there are some areas of growth and pockets of improvement and foodservice where we think we can do a better job. And that's definitely going to be a focus for the coming quarters. Without losing and I will only repeat this 10 times, without losing our focus behind the machine model. Okay, perfect. And then a question on the margin leverage. As we think about the longer term goal of getting to a 20% EBITDA margin rate, can you help us understand where we are in the journey of call it raising the profitability of like the legacy Findus business, particularly in the Nordic region, which I think has lagged? And then some of the opportunities of where are we in the process of kind of improving the profitability run rate of Goodfellas and on Bessie's, knowing that 2019 was more of a reinvestment year for both of those brands? That would be helpful. Thank you. Let me start and obviously, Sami, please to implement what if I'm missing something, I'm sure that I will miss something. But conceptually, first, I mean, you know that our flywheel is really based on the series of, let's say, specific tools. The Muslim battle is 1. It's really part of our DNA. And obviously, the more you're increasing the size and the proportion of Muslim battle, by definition of your mix, you tend to increase naturally your gross margin. That's one thing. The second piece is and it's been very vital for us for the last the 1st 3 years and it's still very important is net revenue management plays a significant role. And you remember that this year, we are digesting so far an unprecedented level of price increase. So I think we've been quite bold. We're bullish. Obviously, we were not a bit afraid of moving some volumes here and there. Obviously, it has to do with price elasticity overall, but we're pleased with that. The 3rd piece is productivity. We still believe that we have more to do in terms of our supply chain, improving the relationship between insourcing and outsourcing, that's one thing, Really working hard and we start initiating a program this year of how to overall raise our standards across the 13 clients we have right now, creating the standards, making sure that level by level every plant has regional standard based on the the best in class KPIs we have. So a lot of things. And obviously, we also have the synergies coming from on basis and with Celad. Now back to your question, more specific question, for example, about with Senal, I think it's been a very interesting journey, Steve. It's been an interesting journey because it's let's say, let's put it that way, 50% brand is 50% private label. So you know the journey with brands and we've just applied our food kits, which is taking the time, just making sure that we have the right packaging, the right quality, we're increasing the quality, we have the right copy, the right advertising and then the right price, by the way, increased price as well. So that's one thing and that's one. And we are quite pleased with the early results, obviously, so only 1 month, but it's too early to say. But at least, it looks good, and we will report later obviously in the coming quarters. The second piece, which is private label, that's also interesting because what we've discovered is we have a whole lot of things, very low margin and then very decent margins. And I think it's an interesting situation because then you can afford to stop some very, very low margin because you know that your brand, if everything goes right, is going to take another capacity. So that's what we're doing with finance. And then little by little, we're going to increase overall gross margin. So back to your question about when are you going to reach the 20%. As you know, we haven't come up with 1 we haven't committed to a deadline. We know that obviously with everything being equal, like for like, we're increasing it. Obviously, we never had the mercy of a big spike in terms of inflation. That's the thing we did this year. We would not have done it this we would not have done it this price increase this year and tell you, I mean, we would have done very much lower. So we're making progress. So that's a journey more than anything else. Sorry, that was very long. No, no, no. That's very helpful. The only point I would add is on top of what Stephane said is that as you recall, we had made the statement that we would increase as well our innovation fee and the share of innovation in our total sales. As you know, we clearly pride ourselves to bring to the market. If you have higher margin innovation, that is as well part of the help amongst all of the things Stefan has mentioned as well. Great. Thank you. And our next question will come from John Baumgartner of Wells Fargo. Good morning. Thanks for the question. Good morning. Stephane, obviously some moving parts with the Easter shift, but even looking at numbers on a first half basis, the volume elasticity was really fairly resilient given the price increases. So I'd just like to get a sense as to your confidence in that elasticity, what you're learning about the pricing power of the portfolio? And then maybe thinking about any cross elasticities, what are you seeing from competing categories? Is pricing fairly rational there as well? So let me start with the global statement. I think overall, I think the pricing at CCT is in line with what we had expected. Obviously, by the condition with some variations country by country because to your point, at the end of the day, most of the time, the competition is becoming rational. It's always taking a bit of time to adjust. So we've seen in some countries, we bring better than expected. Some others, a bit it's a bit it takes a bit more time. But overall, we're pleased with the pricing activity and we're pleased with the pricing power of our brand. Okay. And then just for Sami, anything worth noting in terms of expectations for pea cost inflation for next year? Any comments on the harvest outcome this year? And then on fish, are there any views at this point in terms of the catch rates and any prospects for moderation of the inflation in fish? Thank you. Yes. On the harvest, John, clearly, the situation is definitely better than last year. Clearly, what the summer as it has started this year has really seen some heat waves, but not in the proportion of last year. And the early results we are seeing on the harvest is quite encouraging so far. We're going to know by the end of August, as you know, because probably on Peds, that's probably where we have the highest sensitivity given the fact that it's a one shot. But I would say so far, so good. We should have yields that are better than last year, definitely. On the fish, what we are seeing is still some increase from inflation coming up, but definitely not in the same magnitude of what we have seen this year as I said. It's going to be probably more modest. That's our expectation at this stage. Okay. Thank you, Sami. And our next question will come from Robert Moskow of Credit Suisse. Hi, thank you. This is Jake Nivasch on for Rob. Just a couple of quick questions. So for EBITDA guidance for the back half, is that it looks like there's going to be some like modest growth in the back half, if at all. So we're just wondering, is this largely because of the phasing of your ad spending or just slower growth altogether? Just any color there would be helpful. And then I have a follow-up. Yes. We as you know, we're maintaining the guidance between $420,000,000 and $430,000,000 And what we can tell you at this stage is when you are taking factor in the actuals that we have at the end of June and the prospect on the basis of our total year outlook, we're expecting in each quarter roughly between 8% 14% per quarter of growth. So the spending shift is creating that effect. Got it. Thank you. And then so the Garden Cuisine brand, I think you guys might have mentioned this, but I missed it. What is I guess, what's the strategy for scaling this up? Is it country by country or is it more of a narrow expansion focusing on just like a couple of countries? I'd say we've just started with UK. The objective is obviously not to limit ourselves to 3 SKUs. So it's definitely a starting point. I think it's going to be much bigger because it's really I mean, it's very much in line with the flexitarian trend that we can see. We also believe that we have an amazing, let's say, number of SKUs or product that can work in that category today. So even with or without further expanding. So more to come in the next month, both, and let's say country by country. It's not necessarily going to be both a green cuisine in each country because you know that we also have this concept of global local. The product might be a bit different. Sometimes we'll have just to we'll have the same chassis that you have to adapt to the local space, make a lot of difference, definitely, and that's something that we believe is really part of our success is to be able to deal with this global local thing. And I think very, very, very important and that's a factor of difference compared to many other, let's say, plant protein products. We are very much focused on healthy foods. So it has to be tasty, definitely. It is obviously very much in line with the CSR concept. But probably, I mean, the differentiating factor with all products is the whole healthy that is in terms of saturated fat and in terms of calories by the way. Calories is also important. Perfect. Thank you very much for the help. You're welcome. And our next question will come from Donald McLee of Berenberg. Good afternoon. Two questions. The first is on acquisitions. They continue to be a significant driver of top line growth. But could you provide any more color on what's happening with your organic EBITDA excluding Aunt Bessie's and Goodfella's? It seems like that number might be flat year over year. Is that correct? Can you repeat the question? I'm not sure that I approved it. I don't know if you have it. Sure. Could you give us any color on organic EBITDA excluding Aunt Bessie's and Goodfellas and how that number has grown or moved year over year would be helpful. Sorry. Okay. I had something. Okay. Good. So the point is we don't disclose the EBITDA between base and the acquisition actually. Okay. Then another question Just the point Just the point, I mean, maybe just to give some additional points there. The fundamental I mean, the message we want to give you is that the fundamentals on the base are strong and we are clearly writing our acquisition in line with our expectation as well. That's the thing that for your own modeling, I think that can be helpful, but we don't really break down too. Okay, that's fine. I'll follow-up that then. We are on track. Like for now, we are on track and we are on track in terms of synergies. All right. And then the second question is on cash conversion. Could you provide more color on there's a line item in cash flow statement cash paid related to factor receivables. It'd be great if you could provide any color on the amount of that actual facility and how it might impact your cash conversion? You're talking about what exactly within the cash conversion, I'm sorry? Yes, there's a $3,100,000 payment for cash paid related to the fact of receivables. I think that's the first time that line has shown up in your statements. If you can give an idea of what's actually happening to drive that cash outflow and then how that impacts your cash conversion? We have used factoring based on frankly our needs and the market situation. And actually, it's not the first time we're using it. We've been using it historically as well. And in December, we had about roughly €50,000,000 of factoring. And at this stage, the number exact number is about 30% gradually phasing in or phasing out depending on the market condition and our needs as well. Okay, perfect. That's helpful. Thank you for taking my questions. And we'll take our next question from Cornell Burnette of Citi Research. Okay. Thank you, guys, and congratulations on the quarter. Just wanted to make myself clear about some lines with advertising and promotion. I know that the original 2Q guidance called for flattish EBITDA, but yet EBITDA improved by about 10%. So just wondering how much of that was due to maybe a shift in advertising and promotion. I know there was about $5,000,000 that was supposed to shift out of 1Q primarily into 2Q, but it seems a lot of that's moved back later in the year. So wondering if that's really the main driver of the upside in EBITDA in the quarter? And if not, kind of what prevents you from taking up the EBITDA range for the full year, if you truly kind of beating numbers as we speak? As we have mentioned in the communication, the announcement, we are maintaining guidance, I mean, we continue to maintain guidance. And what we have seen on the ship is truly driven by the business. We're trying to build our plans on a quarterly basis and sometimes we do 3 ships and points on the Green Cuisine launch, if you want, the point at which advertising made sense, that we have to achieve a certain set of distribution before we start our advertising. And that point of distribution is effectively going to be achieved more in Q3 than it was in Q2. So it made no sense to frankly advertise during Q2, and so we decided to shift there. So this is not a cut. I want to be very clear. This is just a shift on the A and P side. And we manage our plan over the year as well on the indirect side. So there are moments where, I think, some projects are shifting, some resource allocation are shifting as well. So at that stage, we are fully maintaining our guidance and we are planning to deliver between €420,000,000 €430,000,000 for the year. Okay, very good. And then adjusting, I guess, for the Easter shift, it looks like volumes are running at about a 2% decline, which is really good in light of the 4 points of pricing that you've been getting. But just wondering, digging deeper into those declines, kind of are they broadly spread maybe across your categories? Or are they more pronounced in a category like peas where you're dealing with kind of some pea supply issues? And then kind of once these supply issues are out of the way perhaps in Q4, how do you see that category progressing for you? On the volume, as you have noted, we've seen a secular decline, which is effectively planned. I mean, what you see on the volume, which is important, is the sensitivity is not just, if you want, a straight outcome of the pricing, but the PPA has an effect that we see the price pack architecture in the short term. I mean, if you set a pack of 12 versus a pack of 14, you have because people buy usually things in packs, then it does have an impact. And over time, people readjust their consumption based on what they consume, if you want. So there's a bit of time always on that one. So that element of volume has an impact, I mean, out there. What we have seen is effectively that, as Stephane was saying, the elasticity has responded in line with expectations, proving the fact that our brands are strong and frankly can handle pricing. And the other piece is the market condition where clearly, let's say, set to confirm the fact that all of the pricing was justified by inflation to be fair, very well differentiated because not only us, but our competitors in the market had moved there because of the raw material inflation that we have seen overall. And last but not least on the Easter impact, I just want to remind, I mean, we were talking about roughly 1.5% shift from one quarter to the other. That was the prime impact that we have seen between both quarters. Okay. And then the last one for me is just if you can provide us with an update on how you're planning to position the business heading into as the October 31 Brexit deadline draws near. Just wondering what contingencies you have in place in case that there's a hard Brexit scenario? Okay. And then to your point, I think we are preparing ourselves for a Brexit or a no deal Brexit or whatever the name we really want to use. So rolling, we're ready for this. We have all the administrative infrastructure in place, which is absolutely fundamental to limit the disruption in that event, which we believe is likely to happen. By definition, you know that our guidance assumes business as usual until we are notified otherwise. But I think what's important is in the end of the no deal, we have been in 3 mitigation strategies that we will use to offset the P and L impact. 1 is it comes naturally, which is the U. K, obviously, let's say the government is offering some import subsidies, which is not insignificant to say the least, that's one thing. For how long, 1 year, maybe more, nobody knows, obviously. Also what I've learned in this situation that the reality of today is not related to tomorrow, but maybe of the day after tomorrow we will see. So that's one thing. 2nd, and it covers a lot of different things, it's the supply chain reorganization. So it really covers many different things. It can be, for example, moving from a U. K. Cofactor to a or maybe even our own capacity to a cofactor in another country. By doing so, your volume exceeded the tariffs moving from the UK to export. Or you can imagine, which is going to take a more long term, is some CapEx reorganization that obviously we modify and in the UK and the rest of Europe or supply chain. One other thing, which is also a short term is we definitely have some communication with some of our suppliers in terms of which going to be the remaining, the net impact after subsidies. And last but not least, after all these things is pricing. There will be definitely in U. K, maybe to less extent in Europe, but in the U. K, depending on the category, we have some pricing power and obviously, it's something that even, let's say, is acknowledged by the trade when they say that there will be price increases. That's a public statement that has been made and that is going to come from people like us. So that's the whole thing. So it's something obviously we've taken, as you can imagine, very seriously. And I think what is also important to understand is and it's not a personal consideration, but beyond October 31, assuming there is no deal, and both parties, Europe and UK, will have to come back to the negotiation table at some stage, because definitely, they cannot at least be in a long, long, long term with the highest tariff possible than our WTO. So that's not part of our plans. So we're obviously planning for the worst. We need to present to this how resilient we're going to deal with this. And definitely, we have more available that are ready for this. And we'll take our next question from Bill Chappell of SunTrust. Thanks. Good morning. Good morning. Good morning. Good morning. Good. Could you just go back a little bit to GoodFellows and even on Bessie's and just maybe kind of an update on how those are progressing since you bought them and maybe some things you've done to them. I mean, you talked a little bit about the reboot on GoodFellas. And so I'm just kind of understanding was that always in the plan or was there a thought that really to get it where you needed to do, you needed a full reboot and same just on Bessie's, I know it's more of a product specific category, but just trying to understand what you can and what you have done with that business? Yes. Let me start with the synergy plan. I think it's synergies are really very much in line, sometimes even slightly better. Overall, on a stand alone basis, some are better, some are probably at least temporarily a bit less than expected. So in other words, I would say Goodfella is really doing well. Quantitatively is doing the depots are doing well. But I would say good for that is doing even better. I think what we're doing is increasing the quality of the private label portfolio and we're increasing the quality and the price, by the way, of our brand part. And we're really rebuilding the brand, which is a great brand. So that's doing well on top of receiving synergies. And let's say, around Dessy is a bit upright now, but let's say, it's highly seasonal. And I think we are very we overall be pleased with what we have. We know that we can obviously, we have built some distribution, let's say, possibilities that we need to further expand. And let's not forget, obviously, that it's a highly seasonal product and an important part of for OMBs is at the end of the year. But overall, very pleased. And in terms of the reboot for Goodfellow, just kind of the understanding behind that? Well, let's move to I mean, let's move back to what we said is, we took our time as we did for all our machine battles by the way, which is, 1, let's make sure that we have a product that is superior and obviously is superior to competition, that's one thing. 2nd is, let's make sure that we have a packaging that is really I mean, that let's become based on the same kind of message, that's the second piece. The third piece is let's make sure that price wise and promotion wise, we have the right model and in line with what the trade is expecting from us. And all this obviously helped by a very good advertising campaign that has just started, as I said, so far. So very good. Obviously, it's a bit too early to say because it's a few weeks, but at least the first few weeks are very, very encouraging. So I think it's very much in line with our playbook, which is reassuring, by the way, because it means that this playbook can really travel not only to the existing portfolio, but can travel to other M and A targets in the future. So that's obviously, we're always trying to improve the playbook, but at least as the way it is right now, it's working very well. Got it. And last one for me, are we maybe too early? Go ahead. The last thing that I have forgot to mention by the way and I mentioned it during the prepared remarks that Portugal was not part of the business plan. So we bought a business based on Ireland in the UK and we see that again, too early to say, but at least the early signals from Portugal are encouraging. But again, it's a small pilot, but these guys, they like to do these kind of things and Igloo as a brand has the right to play with them and we have the distribution muscle. Great. Thanks for the color. Welcome. And our next question will come from Jon Tanwanteng of CJS Securities. Good morning, gentlemen, and nice quarter again. I'm not sure if you addressed this yet. I jumped on a little bit late, but can you talk about the impact of a hot summer on your sales and potential supply and the harvest? Yes. Actually, the summer, as I had mentioned, has been better than last year. So far, frankly, we can't comment on the sales per se because I mean summer is we are in the middle of the summer and we look at our plan on a 3 month basis. What I can comment more is on the probably on the supply side and on the harvest and what we are seeing today is that so far so good. It is definitely better than last year. And the harvest itself has given some encouraging signs, so we'll definitely end up with better yields than last year, provided the weather will continue to remain on that basis. Great. Thanks for that color. And then Stephane, just an update on what you're seeing in the M and A pipeline and maybe a little bit more on the, I guess, the attractiveness of these very healthy options that consumers are gravitating towards. Are you planning on shifting your focus towards those types of entrees? I know you're doing it organically with the Green Cuisine, but from an acquisition standpoint, are you looking more at those? Or are you still trying to go down the fairway with the frozen food and your core types of businesses? It's a very good question. But to your point, first, we want to accelerate organically, we want to accelerate the half part of the business. So plant protein is, as we said, is a very important point for us. We're even going to reorganize ourselves to us to be even more dedicated to plant protein, so that it's coming, which I think is fundamental. We're facing competitors that are fully dedicated to plant protein and so we should be. So that's one thing. Then back to acquisition, or external growth in terms of, of course, healthy options. Definitely, when you see our portfolio 80% of our portfolio is from this nutrition standpoint, it's labeled defined as 80% is considered as good food. And that's quite unique. And definitely, we and by the way, that's something that probably we undersell. We're not very good at that. So we need to do a better job internally, externally, everything. So back to the healthy options, definitely in frozen and potentially non frozen, If we see some assets that are in line with our criteria in terms of obviously strong brands, capacity to be integrated, distribution, strong modes and obviously a good growth potential, definitely something we're going to consider. No doubt about it. And so back to your M and A questions, we're active definitely. At the same time, we are very disciplined. And let me repeat it again, I will never commit to a time line and to a deadline in M and A. That's the best way to show value. Great. Thanks again. And we'll take a follow-up question from Donald McLee of Berenberg. Hey, guys. Quick follow-up on Ocean Beauty. It's been about 6 months since you announced the distribution agreement in the U. S. Could you talk a bit about the progress you're seeing there with your product over in the U. S? Yes. It's an interesting question. And you remember last time when we talked about Ocean Vuitton, I just mentioned, it's an interesting first step, but let's say it's a very first step and it's tiny. I think what I've seen so far is they're in preparing mode, but let's say don't expect something like a big advertising campaign in the U. S. With a lot of money to be invested. So I think we're going to be more granular with the results. And we believe we're going to build maybe 1 stronghold and then go to the other and all these things. So it's going to be a long thing and it's don't expect something spectacular out of this at least in the short term. Long term, that's something else. At least we shall see. It's an interesting development. And what the good news to your point is we have a really we believe a world class fish business in Europe. And yes, we will test how it's going to work in the U. S. We believe the product is superior to what is currently existing in the U. S, and we will see whether the consumers will agree with us. And it does appear we have no further questions at this time. I'll turn the conference back over to Stephane Descheemaeker for any additional or closing remarks. Thank you, Shannon, and thank you for joining us on the call today to review our 2nd quarter results. We're pleased by the progress that we have made through the first half of the year and continue to see further positive growth in both the near and long term. Our core portfolio remains a strong driver of growth with contribution from new innovations like greenfield and acquisitions. With that, thank you for your participation, and I look forward to updating you on our progress when we next report Q3 results in November. That does conclude today's teleconference. Thank you all for your participation.