Thank you for standing by. This is the conference operator. Welcome to the Nomad Foods Q1 2022 Earnings Conference Call. As a reminder, all participants are in listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Anthony Bucalo, Head of Investor Relations. Please go ahead.
Hello, and welcome to the Nomad Foods First Quarter 2022 earnings call. I am Anthony Bucalo, Head of Investor Relations, and I am joined on the call by Stéfan Descheemaeker, our CEO, and Samy Zekhout, our CFO. Before we begin, I would like to draw your attention to the disclaimer on slide 2 of our presentation. This conference call may include certain 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 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 our 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 represent adjusted figures for 2021 and 2022. All adjusted figures have been adjusted for exceptional items, acquisition-related, share-based payment, and related expenses, as well as non-cash FX gains or losses. Unless otherwise noted, all comments from here on will refer to those adjusted numbers. With that, I will hand you over to Stéfan.
Thank you, Anthony, and welcome to the team for your first quarterly earnings. Good afternoon, everyone, and thank you all for joining us on the call today. We're pleased to review our results for the Q1 and to report that we are executing well and remain on track to deliver the 2022 guidance we set back in February.
Our business has been significantly disrupted by a difficult macro backdrop, and we see these results as a great achievement for our team. We're not entirely satisfied with the performance, but we are encouraged by the resilience of our business model, the strength of our brands, and our ability to navigate difficult waters. With the war in Ukraine, we face an unprecedented geopolitical challenge starting the first quarter of 2022.
Our input costs have risen sharply year-over-year, while our consumers are coming under increasing pressure from higher inflation across Europe. It is with this backdrop that we're focusing on performance and delivery, driving world-class retail execution, and strengthening our consumer proposition, while further refining our supply chain through targeted investments and process improvements.
Looking ahead to the rest of the year, we are well hedged on input costs, and we expect at least one more round of price increases to help offset a significant portion of our cost inflation. Supported by our strong free cash flows, we plan to maintain our investment in brand and supply chain improvements, supporting us in 2022 and beyond. We're also investing in our latest acquisition in the Adriatic. We are well positioned for the future.
With that, I'd like to recap our Q1 key financial metrics, beginning with reported revenues of EUR 733 million, which increased by 3.6%, driven by the first year of inclusion of our newly acquired Adriatic business. Organic revenue declined by 4.5%, reflecting difficult volume comparisons against the COVID lockdown that were still in place this time last year.
We delivered an adjusted gross margin of 27.9%, 250 basis points lower year-over-year, reflecting the impact of acquisition, lower organic sales, and higher raw material costs. Adjusted EBITDA of EUR 132 million represents a 4% decline compared to last year as higher input costs before pricing weighed on the results. Finally, adjusted EPS was EUR 0.43 per share.
Although this represents a 9% decline versus last year, we are still on track to deliver our 2022 adjusted EPS guidance of EUR 1.71-EUR 1.75. Turning to slide 4. In the Q1 , positive revenue growth was driven by the first time inclusion of our Adriatic frozen business and a small boost from currency.
Our organic sales declined 4.5% as we lapped last year's strong volume results driven by COVID's lockdowns. We lost sales in the U.K. due to a poultry shortage and lost sales in another large market due to a pricing dispute with a major retail customer. Stripping out these one-off items, our organic revenues would have been down low single digits for the period.
We have since successfully resolved both issues. We did not get the full benefit of our pricing actions during the quarter as our pricing was phased across the period with many of our increases weighted to March. We expect our Q2 sales trends to improve as we get the full benefit of our first quarter pricing and begin lapping post-COVID lockdowns comparison.
However, we do not expect our margin recovery to gain momentum until the 2H of the year after we take our next round of pricing on top of our first round from Q1. Traditionally, we take pricing once annually, acting early in the year. However, we are in a period of unprecedented cost inflation, and we will be taking more pricing mid-year to recover costs. We're planning at least one more wave of pricing for the second half of the year, starting earlier in the UK.
This should boost our top line and help offset the record inflation we are experiencing. Just to be clear, there is always a time lag between cost increases, which are linear, and our price increases to the retailer, which are staggered. What matters to us is the long-term evolution of our margin, and we believe it is imperative to recover gross profit dollars and margin this year to position us appropriately for next year.
We are on track to deliver that recovery in 2023. Our market share trends were highly encouraging in the quarter. Overall, we grew value share 10 basis points across all of our markets. However, we grew share 60 basis points on average in our top four markets, which represents more than 60% of our sales. These are the must-win battles where we define our commercial success.
Higher input costs weighed on our gross margins and profit in Q1. However, we are well prepared for the rest of 2022 with roughly 85% of our raw material hedged. On energy, we are effectively covered for 2022 and have begun hedging for 2023. In edible oils, we have had no shortage to date, and we've taken cover position on all our requirements for 2022.
With this supply crisis, we have accelerated the execution of our risk mitigation strategies, and we have taken steps to diversify our sourcing portfolio across key ingredients. We're also adjusting our product formulations wherever appropriate while still meeting our high-quality standards. We're also quickly taking steps to reduce the volume of Russian waters fish we use in our products, further de-risking our business.
In the year to date, we have been highly encouraged by the performance of our new business in the Adriatic region, driven by an outstanding team across the eight markets. Our Easter performance was strong, giving us confidence of a return to pre-COVID tourism levels for the summer selling season when ice cream consumption peaks. The integration program is progressing well, and we are confident we will meet our EUR 15 million synergy target by 2024.
In August 2021, we announced a $500 million buyback program, which expires in August 2024. In Q1, we repurchased nearly EUR 27 million in shares, and we continue to regard share repurchase as a highly accretive option to drive shareholder value. Turning to slide five. This is not the first time Nomad has been tested during a period of uncertainty.
Over our history, we've passed through multiple challenges and have come out a better company on the other side. After Nomad's creation in 2015, we turned the company around and created a growth culture and must-win battle focus, which is now at the center of who we are today. We managed through the unique challenge of Brexit in 2019, and then the COVID-19 pandemic in 2020 and 2021.
We will be challenged this year by high inflation and the war in Ukraine, but I believe we have robust plans in place and are well positioned to deliver to our commitments and come out a stronger organization. In this difficult environment, we are continuing to provide security of supply for our retail partners, and I'm especially pleased with how our supply chain has evolved to meet these new challenges.
In 2020 and early 2021, we navigated the exceptional COVID demand growth when our facilities were running at higher than 90% capacity. Through late 2021 and this year to date, we have step-changed our capacity to source, convert, and supply at the highest quality despite global shortage of raw materials and exceptional inflationary pressures.
Our current service level improved significantly from a year ago, finishing the Q1 of 2022 at a 96% fill rate, an improvement of 300 basis points versus the same period last year. Additionally, we've maintained our focus on innovation, and we are actively evolving our portfolio to reflect new market realities. This is especially important in light of the rapidly climbing costs for all of our proteins.
Our flagship Green Cuisine plant protein line is gaining share, and we have more innovation planned for the second quarter with that brand. We are also pleased that in the Grocer Gold Awards for 2022, Green Cuisine has been shortlisted for Food Brand of the Year. In addition, our Proud to Power Team GB for the 2020 Tokyo Olympics campaign has also been shortlisted for Consumer Initiative of the Year.
Finally, it is worth noting that even with this difficult backdrop. We are resolute in our focus on our social responsibility commitments. We've maintained our efforts on meeting our ESG goal, especially in the area of net carbon neutrality. When looking out to the balance of 2022, we believe we are on track to deliver against our most important financial metrics.
As Samy will discuss later in more detail, we are guiding to grow our business in line with what we have achieved in recent years. I believe it is important to look at what we have accomplished in the creation of this business in 2015. After consolidating Birds Eye, Iglo, and Findus, we've grown revenues from EUR 1.9 billion to EUR 2.6 billion in 2021, with a run rate this year of EUR 2.9 billion, including a full year of our new Adriatic business.
We expect to have more than double adjusted EPS from 2016 to the end of 2022. We have successfully integrated more than EUR 1 billion of accretive acquisitions, including Goodfella's, Aunt Bessie's, and Findus Switzerland, and we plan to add more value creating strategic assets in the future.
There is volatility in the situation, including our supply chain, and we expect to see some elasticity in our sales this year. We are confident that our business is well-positioned to produce good results under difficult conditions. I also am confident that our growth will accelerate when this period of uncertainty eases, supported by our excellent team across Europe, a strong brand portfolio, and a proven track record of deploying capital in an optimal way, driving value for our shareholders.
With that, I will now hand the call over to Samy to review our financial results and guidance in more detail. Samy? Thank you, Stéfan, and thank you all for your participation on the call today. Turning to slide seven, I will provide more detail on our key Q1 operating metrics.
We reported revenues of EUR 733 million in the Q1 , a growth of 3.6% year-on-year, driven primarily by the acquisition of our Adriatic business. As a reminder, that transaction was finalized in September 2021. Beyond M&A, Q1 revenues also benefited 1.4 percentage points from favorable FX translation.
These growth drivers were offset by a 4.5% decline in organic revenues due to difficult lockdown comparisons, supply chain constraints in the UK, and the loss of some promotional volume in key markets. Gross margins were 27.9% during the Q1 , reflecting a 250 basis points decline compared to the prior year and in line with our expectations. This was composed of a 200 basis points decline in our base business as inflationary pressures impacted margins during the quarter.
The remaining 50 basis points contraction was driven by the inclusion of the Adriatic acquisition, whose gross margins are seasonally lower at this time of the year. Mix mitigating, pricing follows at a lag, with further price increases expected to be implemented through 2022. Moving to the rest of the P&L.Q1 adjusted operating expenses of EUR 94 million were stable year-over-year.
This year-over-year stability reflects a more normalized level of A&P spend. We remain committed to supporting our brands with appropriate level of spending. Q1 adjusted EBITDA of EUR 132 million was down 4% versus the prior year, and our adjusted EPS of EUR 0.43 reflected a 9% decline versus the prior year, reflecting the factors previously discussed. Turning to cash flow on slide eight.
We generated EUR 46 million of adjusted free cash flow in the Q1 , equating to 62% free cash flow conversion. This is below Q1 of last year, as we are still benefiting from a COVID-related tailwind before we rebuilt our inventory position during the remainder of 2021.
Change in working capital switched from a source of cash last year to a EUR 29 million use of cash in this quarter as we build raw material inventories in anticipation of possible shortages. While CapEx was flat versus a year ago in Q1, we do expect a higher CapEx for the year as we support strategic investment decisions. Changes in both cash interest and cash tax in the quarter were broadly offsetting, primarily due to phasing. We expect to deliver strong free cash flows in this year.
However, we also expect a combination of stepped up capital investment, higher inventories, and the implementation of the EU's Unfair Trading Practices Directive to leave us short of our typical 90%-100% medium-term conversion targets. With that, let's turn to our final slide nine, to review our 2022 guidance, which we are reiterating from CAGNY in our year-end 2021 earnings report in February. Our guidance on sales and EPS is based on our best projections of cost inflation and other factors in the 2H of 2022.
As Stéfan mentioned in his remarks, we plan to recover cost inflation through several waves of pricing throughout the year, and thus we expect an improving gross margin profile over the course of 2022. We expect the second wave of pricing to support margin recovery in the second half so that we can start 2023 with an appropriate level of margin. We remain reactive to market dynamics.
Hence, we may need to execute a third wave of pricing toward the end of the year should inflationary pressures persist. The Adriatic business is weighted towards the Q2 and Q3 , and we expect the favorable mix from the Adriatic to provide a tailwind to margin during those quarters as well. To be clear, we expect a sequentially improving financial performance throughout 2022 based on our improving margin evolution as our pricing takes hold.
We expect organic revenue growth in the low single-digit range for 2022. This will be driven by phased price increases to the 1H and 2H of the year. Low single-digit growth is consistent with what we guided in February. However, we expect a different mix of volume and price in our sales build-up than in our original guidance.
In our original guidance, we expected a relatively balanced mix of volume and price with a small spread between the two. However, we now expect a wider spread between price and volume with significantly higher pricing but much more negative volumes as we push for maximal cost recovery. We expect the Adriatic's contribution to revenue to support our reported revenue guidance of high single digits for the full year.
All in, we expect adjusted EPS in a range of EUR 1.71-EUR 1.75 per share, another year of double-digit growth. That concludes our remarks. I will now turn the session over to Q&A. Thank you. Operator, back to you.
Thank you. We will now begin the question-and-answer session. To join the question queue, you may press star then one on your telephone keypad. You will hear a tone acknowledging your request. If you are using a speakerphone, please pick up your handset before pressing any keys. To withdraw your question, please press star then two. We will pause for a moment as callers join the queue. The first question comes from Robert Moskow with Credit Suisse. Please go ahead.
Hi. Thank you. I wanted to ask one question about the guidance. I think you said you might need a third wave of pricing if inflation persists. I want to know, does that mean that if inflation keeps climbing from here, you'll need a third wave? Does that mean that if costs stay as high as they are today, you'll need a third wave? I'd like a quick follow-up.
Hi, Robert. I mean, actually, what this means is that what we have seen is a steady increase in inflation and now in the middle of, let's say, the execution of the current pricing, which is the second wave. If effectively inflation keeps on creeping up, if you want, overall, then we would effectively consider a third wave at this stage.
Okay. My next one. I wanted to make sure I understood your competitive positioning in fish. You've been very transparent about, you know, 50% of your supply coming from Russia, and that would seem like a logical thing to present to a retailer to raise price. I was wondering if you knew whether your competitors in private label and other brands are facing the same challenges as you, and therefore they have to raise as well. Do you think that you're the one who has to raise more than they do because of your sourcing?
Thanks, Rob, for the question. It's very simple. Obviously, you know, we don't have the full intelligence, but we have a good intelligence. Our understanding is that our competitors, mostly some brand players, but mostly private label producers, are exactly in the same situation as sometimes, you know, probably, you know, even more dependent on Russian fish.
It's for them, you know, they're facing the same situation, I would put it that way. I think we're moving quite fast. I can't judge for them. In terms of cost increase, I would put it that way, Robert. Well, it's broad-based. It's not limited to fish, by the way. It's across the board.
In terms of fish, well, I don't see why, you know, they would have a different situation in terms of price. The only question they're facing, but I'm not in their shoes, is when they're going to decide, obviously, to pass the price, the cost increase, A, from the private label supplier to the retailer, and B, from the retailer to the consumers. That is obviously something which is not in my, you know, in my remit. It's going to come, no matter what, you know? It's more a question of when than if.
Okay. I'll get back in the queue. Thanks.
I would even argue, if you don't mind, that as a private label, you're starting from a lower baseline in terms of price, but you're facing exactly in absolute terms the same kind of cost increase, which means that, you know, in the relative terms, if and when you're going to pass the cost increase, in relative terms, it's going to be a steeper, Increase.
Got it. Thank you.
The next question comes from Cody Ross with UBS. Please go ahead.
Hey, good morning, folks. Thank you for taking our question. First question, I'm a little confused about your organic growth guidance for 2022. In your press release, you noted a modest organic revenue decline for the year, and in the slides in your commentary, you noted a low single-digit organic growth. Can you just help us put those two together?
Yeah, sure. I think there has been a corrected statement being made in the press release. I've just been informed. I mean, right now, I think an incorrect version has been put there. There will be modest growth. The remarks I have put in the speech in the comments on the earnings are the correct one. It is a modest organic growth for the year. That's what is intended at this stage.
Got it. That's helpful. Thank you for that. Then you held your full year EPS outlook. Many investors we speak with are concerned about the 2H operating environment as it gets tougher. Can you just help us understand some of the assumptions underpinning your expectations for the 2H ? Assuming organic sales growth sequentially builds, gross margin declines moderate, and then operating expense, should we expect that to decline in the back half? Is that the right way to think about it? Thank you.
Yeah, I would say overall, if you're to take the total map, what we see effectively is a bit of a steady inflation impact across the quarter, more or less. If you want a bit of a ramp up gradually, I mean, coming from, let's say, the end of the last year, getting into this year. At the same time, we have implemented the first wave of pricing in Q1, which is executed as we speak, and where we see the impact, effectively full-fledged impact as of probably the end of Q1, as you had mentioned. Then we are in the process of implementing the second pricing, if you.
There is effectively, when you look at point to point, end of December to early January, you see this gradual development of pricing with quite a significant step up in pricing in order for, from an average standpoint, to recover the totality of the inflation, or at least to end up with an exit picture, if you want, that would have compensated for the inflation.
When you take those two elements into consideration, there is an element of neutralization. That's the objective in order to preserve the cost structure and set the right base for 2023. At the same time, effectively, we continue to maintain our cost discipline. We continue to maintain, effectively to tighten the screw. We have made some discretionary intervention that are clearly not impacting the business there.
We still have some element of protection as we see at this stage in terms of in case effective inflation moves up a bit further. We have talked about the possibility of a third wave, and we do have as well some discretionary intervention that we could trigger should effectively the situation require some more intervention. At this very stage, under the hypothesis effectively that we have, I mean, clearly we feel comfortable with the guidance range that we have of EUR 1.70-1.71 to 1.75 per share EPS.
Thank you. I'll pass it on.
The next question comes from Stephen Powers with Deutsche Bank. Please go ahead.
Yes. Hi, good morning. I was hoping you could give us a little bit more perspective on your raw materials expectations, less from a cost perspective, but more from an availability perspective. I'm most focused on fish, whitefish from Russia, but just more broadly if relevant. I guess in the case where EU or UK relations with Russia continue to deteriorate and there's a tail risk of excessive tariffs or even importation bans on Russia whitefish, how do you size that risk? Then what are your mitigation strategies in the event that tail risk might actually play out?
Well, we've not been waiting for, you know, to materialize. At this stage, to be fair, you know, I think we just can be sourced in a normal way. That's one thing. At the same time, as we said, you know, repeatedly, we're taking steps to reduce the volume purchase there. Again, it's not like you switch off and switch on the light.
You know, you're talking about fish, and you need to breed to obviously grow the fish. You need to make sure that you have the right quality. It has to be MSC or ASC, so high quality standard, which is really what Nomad is all about. With that constraint, which is a great constraint, yes, we have.
We are finding some ways to increase the purchase from outside of Russia. We're working with some replacement in terms of species like hake, for example, which is very close in terms of flesh and taste. We're starting, and it's something that is going to be significant in the coming years. We're starting with you know, farmed fish use.
Today we are. That's something like 98% is wild caught. But definitely the future lies also with farmed fish, provided again, that we're dealing with the same kind of quality criteria. So in other words, instead of going to MSC, which is Marine Stewardship Council, we're going to ASC, which is Aquaculture Stewardship Council.
This is the kind of things we're going to develop together with the farms in Southern. Mostly it's in South and Southeast Asia, so we're taking appropriate steps to get there. In the meantime, yes, absolutely. You're also working with Green Cuisine, which is, you know, we have a fantastic product which is called Fishless Fingers.
It's working very well, aside from any threat, by the way. That's definitely a product that is today one of the best sellers in the UK and in countries like Germany. Other options we're taking. Definitely I can tell you. I'd say the procurement team is, and the R&D teams are reasonably busy right now, which is the right thing to do, by the way.
Because we don't think that there is a way back to the previous situation. We want to reduce our dependency, and we're going to, no matter what happens in the future. We don't think it's going to be back to a normal situation. There is a new normal, and we're trying to define this new normal together with our suppliers.
That's for fish. In terms of other materials, well, let's say aside from the fact that, you know, everything, you know, has been the, you know, the prices have been increasing, it's been a broad, let's say broad-based situation. Big things that I think coming from these countries is, for example, edible oils.
It's impacted by the war, but we are contracted for edible oils, and we have taken cover position on all our requirements for 2022. We have had no shortages to date. We also use rapeseed oil, as you know. I mean, rapeseed oil has been an important. I mean, a lot of people have heard for the first time sometimes, you know, rapeseed oil and how important that is in food.
We're working with our key suppliers to ensure that multi specs are approved and sorted if required. Which is fine. I think again, that we're doing this without, you know, damaging at all, you know, the quality standards that we have with Nomad. Energy is another thing.
Obviously, we know where we stand at this stage. We have a multi-year cover strategy to 2025. We're covered in 2022, well hedged in for 2023, starting in 2024. I think we've taken the right measures. Again, it's not going to stop here. More to come in the coming weeks, months, and quarters.
That is extremely helpful. Thank you for that perspective. If I could ask one follow-up on a different topic. On the second and potentially third rounds of pricing that you're anticipating or contemplating. In your low single digit organic growth guidance, how have you factored in potential, you know, retailer friction, you know, as you saw in the Q1 on future waves of pricing? Is that something you've baked into the outlook?
We say, I mean, of course, I mean, are very much on, let's say, observing that in the conversation we had. I mean, just to give you some perspective in the context of the first round, and I'll give you some perspective. At the same time, if you want, for every price increase we have done historically, we had a number of tension points because this is an exercise that usually start in September, October of the prior year, and that ends up around, you know, end of February, depending on the market. There has always been a point of, let's say, debate, negotiation, and so on.
This year, we only had one, which had ended up actually in a positive way, which is quite unusual, but that tells you one thing, which is effectively retailers and manufacturers are in the same boat, I mean, at this stage. I do think that the simple fact that there is a broad-based inflation, that's a challenge that's hitting everybody.
There is a matter of frankly preservation of margin even at their end, which they do understand. The question effectively is about talking about funding, if you want, the whole pricing and who's going to be effectively pricing by the most. At this very stage, if you want, we had gone pretty successfully on the world first wave. On the second wave, we are managing the mix. There are different variable that we have.
I just want to highlight to you that pricing is pricing, effectively it's list price. There's a number of other element that we are looking at, such as promotion, as an example, or potentially if you want, working a bit more on the mix, working effectively as well on trade terms in order for us to boost the total mix.
That's what we call our revenue growth management strategy. We are clearly leveraging both sides, which is purely price and revenue growth management to circumvent some possible risk at this stage. Indeed, I mean, those risks are there, and it's our job to manage the totality of the portfolio of risk in order to deliver against the objectives.
Very good. Thank you both.
No problem.
The next question comes from Jonathan Tanwanteng with CJS Securities. Please go ahead.
Hi, good morning. Thank you for taking my questions, and nice quarter. You mentioned that you were 85% hedged on your supply. Where are you open-ended at this point, either by feedstock or end market, and kind of what are the risks there that you're looking at?
Well, to your point, I think we hedged 85% until the end of the year, and I think we're making progress moving forward in 2023. The 15% is really, I mean, where you know, there are some categories where it's really difficult. You know, on some of our ingredients, it's impossible, quasi impossible to hedge.
We're pushing the system to the limit. You know, I'm coming from an environment where we like to hedge 100% on a twelve-month basis. I think we're making progress from that standpoint. We also need to recognize there are some pieces of the business where it's almost impossible. It is, you know. There is no one thing that I would like to pinpoint. I think it's more broad-based.
Let's say it's more ingredients. You know, you can, let's say, we mentioned, for example, eggs, that kind of things are just more difficult than some other categories of food that way. You will just. I mean, I'm sure that you're familiar with all of the food business, but in situation like us, where you have effectively, fish, poultry and veg and so on, it's not necessarily in the best interest even of the supplier to really lock in an entire year.
I think the team has done an extraordinary job to get us to the 85%, and really pushing even further more. It's really a question of realigning with suppliers on making sure that we can benefit from their production, in whichever form it is, in order for us to lock completely for the year, the price.
As Stéfan said, there's an antagonism on this one, which is at the same time as we want to get the 85% higher, we need to plant the seeds to frankly get to a proper coverage as well for 2023. Yeah.
Okay, great. Thank you. I don't know if you addressed this, but how should we think of your capital allocation priorities, you know, given valuations are down across the board in a number of sectors and assets and, including your own shares. Are repurchases more of a priority now, or is M&A still the focus for you guys?
The message, I mean, is still the same. I mean, clearly it's all about frankly seeking for the best opportunity to maximize return at this stage. We've stated effectively that we have an opportunistic approach on that one, and we are in constant assessment of all of the options available, including those that you mentioned, and of course, I mean, supporting the business. That's frankly the view that we have.
Okay, great.
Sometimes.
If I could-
Yeah, sometimes also it's-
Go ahead.
to buy additional commodity, by the way. Yes.
Okay. If I could ask one more. Is your scale enabling you to take share and engage shelf space in a tougher environment versus maybe what your competitors are doing at this point?
Sorry, can you repeat the question? I'm not sure I did get it.
Yeah. Is your scale and those supply agreements enabling you to drive, you know, shelf space and market share gain in this environment?
Well, I think overall, you know, I think that all the supply chains have been obviously challenged. We're not the only ones. I would say that in some categories where we have a significant position, yes, scale is a positive.
Uh-uh.
Especially long-term agreements. People remember, especially in more challenging times. I think I would call it frankly scale, and know-how, and category captaincy. Yeah. Retailers are really looking at us clearly to help reshape the shelf if at some point there are movements within food, across the different sectors. It's not just scale, I think, in itself.
The organization has developed a very deep knowledge, a very deep in-store knowledge and shelving knowledge, whereby the retailers are really looking at us to frankly help them design the shelf while maximizing impact on their revenue at their end, and we're clearly, let's say, requested or asked to help them in that respect.
Understood. Thank you and good luck.
Thanks.
The next question comes from Ryan Bell with Consumer Edge Research. Please go ahead.
Good morning. Would you be able to discuss how the Fortenova integration is going, and then also maybe give a little bit of an understanding about the recovery on-premise broadly across your portfolio, but obviously, specifically for Fortenova and the regions that they operate in?
Well, overall, to make it simple, I mean, the Fortenova acquisition integration is doing extremely well. By the way, it's an interesting pattern because all the acquisitions we've been through so far with a clear focus behind frozen food, which is, you know, I keep believing in that the focus is paying off in terms of obviously know-how, in terms of how to approach an acquisition, how to generate the synergies. Every time we're going through another acquisition, we, I think or let's say our model is improving.
Fortenova is really in the middle of this. First, the first thing is what we've seen after an extensive due diligence is no real surprise. By definition, you always have surprises, but let's say at this stage, you know, we have more good surprise than the bad surprises. That's one thing.
The team is extremely supportive, extremely excited to be part of being a core strategy of the organization, which is a big change for them. I can tell you in terms of energy, it's a huge. It makes a huge difference. People also want to learn, and you know, I think we have, let's say some interesting tools that they can take.
On top of that, you know, to your point, I think, we also have, I mean, in terms back to on-premise, you know, we think it's a great asset for ice cream, but also for frozen food. We have 120,000, let's say, freezers across the organization.
It's part of our CapEx, by the way. It's something that we knew from the start that we need to obviously improve the quality of the assets. It's something we're doing right now. Just signed the lease, the last piece of it right now for this year. What we've seen at least so far is Easter has been extremely good for us.
We're starting to come back to pre-COVID situations in terms of ice cream, because this is obviously, let's say out of home impulse was a bit, obviously, has been, let's say. There were some issues during COVID. I think we can see it's improving big time.
We're quite confident that what's going to happen in the summer is going to be extremely helpful with a very good team. Improve the infrastructure, new tools, and post-COVID. Yeah, I think it's we really like the acquisition. By the way, we also love the margins, you know, impulse ice cream, gosh, you know, it's a great margin. We love it.
If I could just ask one more. You took phased pricing throughout one Q, and you highlighted a significant portion of that actually came towards the back half or the back end of the quarter. Would you be able to talk about the depth of price increases kind of as we got towards the end of the quarter, just to understand the magnitude of the full effect of those pricing?
Yeah. I think the comment was really here to talk more about the pricing impact on the sales than its execution. The reality is that in the FMCG world, when you pass this price, you have to support your business during transition time, and you have to put in place the relevant level of promotions together with the retailer in order to facilitate the transition from a given price point to another price point.
Managing your promotion during a price increase is essential. What happens is, just to pick an example, if you have a market that's technically raising prices on January 1, you rarely, if you want a net impact on your net sales pricing, you start to see the effect after probably 45 days or so, 45-50 days on average. It's not that we have deferred the execution.
I think what's really important was that we did execute the price. Actually, even the UK started even earlier than that, but the majority of the markets have executed all of the pricing between January and February. The ramp-up of the effect on a net basis after promotion is really hitting most as of March, let's say.
Would you be able to say kind of the size of that pricing on a percentage basis?
Yeah. I think it's quite broadly known. I think it's in the range probably of a mid-single digit level. I mean, at this stage, depending on the market, some of them was a bit on the high end of the, let's say a single digit. The other one we're really closer to the mid-single, but the average is probably around the mid-single from a list price execution standpoint, not after promotion, just list price.
Thanks so much.
Welcome.
Once again, if you have a question, please press star then one. The next question comes from Robert Moskow with Credit Suisse. Please go ahead.
Hi. Just to follow up, the frozen category in Europe, the data looks pretty weak. Declines have continued. I thought it was due to increased mobility among consumers. How is the category doing compared to others in Europe? Has that influenced at all the retailers' willingness to allow higher pricing to go through? Thanks.
Well, I think to start with your second part, I don't think it impacts, you know, the willingness to come up with prices because they also, by the way, as you know, I mean, they are private labels, so they're going through the same kind of costs as us, so that would be a big mistake, and they're not making this mistake.
To your point, I think at this stage, yes, let's say frozen is a bit weaker than the others, but you need also to remember that during the same period last year, I mean, during COVID-19, it significantly overperformed, you know, the other categories, ambient and perishable.
Overall, when you see on a two-year basis, we're still doing very well. I'm not concerned, but definitely we want to see obviously things moving on. That's one thing. Yeah, that's. We very much, you know, you're taking a longer-term approach, a two years approach, three years approach.
It's, you know, the numbers are very consistent. I also believe, by the way, I don't know if you noticed, but we've come up with an announcement in terms of sustainability and the LCA, which is life cycle assessment. We've come up with a study, a very thorough study, by the way, end-to-end in terms of, let's say all 22 bigger SKUs.
We compared, you know, the carbon footprint end-to-end really from, let's say, the field to the fork, with the equivalent in, let's say, fresh or ambient. I think for most of them, you know, we're doing equal or better than these guys. The reason is most of the time it's attributed to waste because, you know, the waste level at the store level is obviously much better for us, same thing for the consumers. I think one thing we need to probably communicate better is also waste is great in terms of sustainability or less waste, but it's even better for the disposable income.
In other words, you know, you're going to save money on a full year basis if you go to at the same price with frozen foods because the waste level is just much lower, not only at the retailer level but also the consumer. That's the kind of things that, you know, we believe that the fundamentals of frozen, like, great. At this stage, as I said, you know, yes, it's a bit weaker, but when you're taking the long-term strength, it's very much in line.
Okay. Thank you.
The next question comes from Cody Ross with UBS. Please go ahead.
Hey there. Thank you for taking our follow-up. Just a quick question. You only repurchased EUR 27 million worth of shares, yet stock is down 30% this year, and you have nearly EUR 400 million left in dry powder. At what point would you consider accelerating your share repurchase? Thank you.
I'm gonna repeat the message I gave you, I mean, before. We have made those repurchases effectively prior to the Ukraine war. We made it very clear in our communication that the priority for us is to make sure that we clearly had access to supply in order to serve our consumers.
That was really important. That's why effectively we spent probably more money in inventory, in building up, I mean, those products that were necessary to have our plant functioning at full regime, I mean, from that perspective. From a general standpoint, if you want, as we generate cash, if you want, let's say quarter after quarter, we're looking at effectively the best way to allocate this capital. Frankly, at this stage, frankly, there is no, let's say, silver bullet there.
We're just after shareholder value maximization, and we're in a constant, let's say, lookout for that, taking into consideration, of course, the external environment, which is all about effective supply availability. The question was raised earlier. I think it's, there's no magic formula. There's not going to be a threshold per se, but it's all about really what's effectively the right mix that's gonna get us the maximization of shareholder value.
This concludes the question and answer session. I would like to turn the conference back over to Stéfan Descheemaeker for any closing remarks.
Thanks, operator, and thank you for your participation on today's call. 2022 has gotten off to a challenging start, but we're optimistic. Yes, the troubling war in Ukraine has presented us with a difficult set of hurdles, as it has for everyone around the globe. We are encouraged by the great people working at Nomad, our fruitful partnership with our retail customers, and our loyal consumers.
We will remain focused on delivering our business objectives, even in these tumultuous conditions. Frozen food is, as I said, a healthy, nutritious, affordable option for all families, especially during difficult times like these. Our business is built to survive in tough conditions, and we expect to come out of this crisis stronger than before. We delivered a fifth consecutive year of record financial performance in 2021, and we expect to do so again in 2022.
This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.