Good morning. Welcome to the Nomad Foods first quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by 0. After today's presentation, there'll be an opportunity to ask questions. To ask a question, you may press star then 1 on your telephone keypad. To withdraw your question, please press star then 2. Please note this event is being recorded. I will now return the conference over to Anthony Bucalo, Head of Investor Relations. Please go ahead.
Hello, welcome to the Nomad Foods first quarter 2023 earnings call. I'm Anthony Bucalo, Head of Investor Relations, and I am joined on the call by Stefan 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 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 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 costs, share-based payments and related expenses, as well as non-cash FX gains or losses. Unless otherwise noted, comments from here on will refer to those adjusted numbers. With that, I will hand you over to Stefan.
Thank you, Tony. Thank you for joining us on the call today. Nomad had a solid start to the year as our sales momentum from the second half of last year continued in the first quarter. Additionally, our teams did an excellent job executing the strategies we announced at CAGNY in February. I'm pleased with the performance of the great people across Nomad who delivered excellent results to start the year off right. Last year, we faced a difficult environment brought on by post-COVID inflation and the outbreak of the Ukraine war. We adapted to confront these challenges last year and put new plans in place this year to make Nomad even more resilient and positioned for growth. Overall, we believe our Q1 results demonstrate that we are on the right path to accomplish our goals. In Q1, our revenues grew organically 8%.
Another sequential quarter of improving sales trends. The benefits of our pricing strategy and disciplined supply chain management were visible in improving adjusted gross margin and EBITDA margin, both of which grew 100 basis points year-over-year. We also delivered adjusted EPS of EUR 0.46, which grew 7% in the quarter. As we shared at CAGNY in February, we have three central priorities for this year. Our first priority is to strengthen our commercial approach with additional A&P investments for our brands while adding affordability options for stressed consumers. This includes not just innovation, but renovation for many of our best-selling products. Our second priority is to leverage the efficient savings from our world-class supply chain to help fund growth. Our final priority is execution of our revenue growth management strategy designed to recoup costs through pricing and maximize the value of our portfolio.
I'm happy to say we are on course for all three. Our new A&P investment is reaching the market now in Q2 and will be fully deployed in the third and fourth quarters. Our supply chain is performing well, delivering excellent service and efficiently managing our procurement process. Finally, our revenue growth management execution is helping drive price and mix, further narrowing our cost gaps. Overall, Nomad is in a much better position today than at this time last year. We are highly encouraged by the resilience of our top line and the improvement in our margins. 23 will have its challenges, but with our improving fundamentals and expected step-up in cash flow and strengthening balance sheet, we are highly optimistic about this year and beyond. We are on track to meet our guidance expectations.
With that, I'd like to recap our first quarter key financial metrics, beginning with revenues. Q1 revenues grew 5.8% with strong pricing more than offsetting volume declines. Organic sales grew 8%. However, we experienced 2.2 percentage points of negative Forex impact. Adjusted gross margins grew 100 basis points to 28.9%, driven by our pricing initiatives and supply chain execution. Adjusted EBITDA grew 11% to EUR 146 million, with margin improving 100 basis points. Finally, adjusted EPS was EUR 0.46 per share, up 7% versus last year. At current US dollar spot rates, our Q1 adjusted EPS was $0.51. Our revenue performance was strong in the first quarter as our pricing from the second half of 2022 rolled over into the start of the year.
This was the fourth sequential quarter of improving organic sales trends against a challenging consumer environment. Our mid-tier pricing more than offset a mid-single-digit volume decline as our volume went impacted by elasticity and price gaps with competition. We have further narrowed the gap between our price and input cost this quarter with a positive margin expansion. Raw material prices are moderating. We are not seeing meaningful deflation. It is our plan to recoup our input cost inflation from 2022 and 2023 by year-end. This will help fund our plans for stepped up investments in A&P and innovation. This is crucial for the health of our business. Our world-class supply chain continues to show positive results. We delivered service to our customers at a multiyear high, with level above 97%, up 100 basis points from last year.
Additionally, we remain disciplined on procurement, and we are covered for nearly 80% of materials for the year. We're giving ourselves more flexibility on coverage than in previous years, becoming more analytical and strategic on how we acquire raw materials. We lost about 1% value share this quarter. This loss was a direct impact of both elasticity in the price gaps, which have not yet narrowed versus our private label competition. However, our new A&P investment hits the market starting late in Q2 and will be rolling out across the balance of the year. With greater brand support and innovation, we expect to reverse these losses as the year progresses. Finally, with our strong EPS delivery this quarter, we are raising the lower end of our 2023 adjusted EPS guidance to EUR 1.52 from EUR 1.50.
Our original range of EUR 1.50-EUR 1.55 now stands at EUR 1.52-EUR 1.55. This represents an adjusted EPS range of $1.67-$1.71 at current US dollar spot rates and excludes any impact of capital allocation. This quarter, we benefited from the adjustments we made to our business model last year, combined with the new plans we have rolled out this year. We plan to return to our historic margins over time, and we made progress during the quarter. In Q1, margins benefited from our pricing from the second half of 2022. Additionally, we showed the benefits of supply chain discipline and cost savings programs. As a result, our gross margin expanded organically for the first time since the end of 2020.
With our continued focus on price realization and supply chain discipline, this good early start puts us on target to meet our goal of flat adjusted gross margins for 2023. We kicked off our affordability strategy design to attract and retain consumers during this period of high inflation across Europe. We have adjusted many of our promotions on key items in selective markets to keep consumers in our portfolio. Additionally, our expanded above and below the line communication strategies are carrying the message of frozen food intrinsic values, including lower waste, high nutrition, product versatility, and good value. We are seeing strong initial evidence that our message is taking root. Long term, we think the strategy gives us the opportunity to reconnect with consumers and strengthen loyalty to our brands.
Finally, we're seeing the full benefits of the farmed fish supply strategy we accelerated after the outbreak of the Ukraine war last year. With our new source of fish, we launched new and innovative products across four of our markets, including the U.K., Germany, the Netherlands, and France. We have a scheduled expansion into at least another three new markets this year. The initial results have been very encouraging and we are excited by innovation opportunities the new supply of high-quality fish provides us. With that, I will now hand the call over to Samy to review our financial results and guidance in more detail. Samy?
Thank you, Stefan
As we communicated at CAGNY, we expect market share trends to improve sequentially this year, driven by our innovation efforts on affordability as well as stepped-up A&P investment. We delivered a strong margin performance this quarter. Adjusted gross margin was 28.9%, 100 basis points increase versus the prior year, reflecting the successful recovery of higher input costs through pricing. We continue to navigate an inflationary environment. In Q1, we saw a benefit in the cost of goods sold from the tail end of cover position from 2022. To keep ahead, while we have strong cover now in place for the rest of 2023, the full effect of inflationary impact on COGS will be realized as the year progresses. As we look out to the rest of the year, we expect to deliver flat gross margins supported by price increases and cost discipline.
Moving down to the rest of the PNL. Our adjusted gross profit grew 10% to EUR 224 million for the 1st quarter. Adjusted COGS increased to EUR 551 million, an increase of 4.3%, EUR 23 million versus last year. Adjusted operating expense of EUR 100 million was up 6% year-over-year. Adjusted EBITDA of EUR 146 million was up 11% versus last year. Adjusted EBITDA margin landed at 18.9%, an increase of 100 basis points. Finally, adjusted EPS of EUR 0.46 was up 7% in Q1. This translates into $0.51 in US dollar term at spot rate. Turning to cash flow on slide 7.
Cash generation is crucial to the health of our business and remains the top priority as we consider capital allocation for this year and beyond. In Q1, we generated EUR 25 million of adjusted free cash flow for a conversion ratio of 32%, versus 62% in Q1, 2022. Q1 was adversely impacted by the phasing of inventory, receivables and payables in certain markets during the quarter. The adverse phasing of receivable and payable is temporary and should reverse in Q2. We remain on target for our 2023 cash flow guidance and our options for accredited capital allocation remain wide open. CapEx of EUR 21 million was flat versus last year. We continue to support strategic investments in the business. Changes in cash tax increased EUR 1 million to EUR 10 million, while cash interest was down EUR 2 million to EUR 25 million.
As part of our refinancing in November 2022, we will be facing higher cash interest payments on a portion of our debt. As a result, we saw a cash benefit in Q1 before realizing the full impact of higher interest charges in Q2. Last year, our cash generation was negatively impacted by a working capital build to mitigate the possibility of supply shortages in the middle of the year. We are also impacted by the implementation of Unfair Trading Practices Directive, UTPD in the EU. This year, with more normalized inventory level and UTPD in the base, we expect cash flow conversion in line with our historical average. With that, let's turn to slide 8 to review our 2023 guidance, which we initiated in our 2022 earnings report in February and are updating today.
This guidance is based on foreign exchange rates as of May 3rd, 2023. We are updating the original guidance we delivered in our 2022 year-end earnings report. First, we expect organic revenue growth to be in the mid-single digit range for 2023. We expect our pricing initiative to more than offset volume declines. We expect cash flow to be in line with our historical performance. With working capital and UTPD in the base, we expect our cash conversion ratio in the range of 90%-95% in line with historical averages. We are raising the bottom end of our original 2023 guidance. We now expect adjusted EPS in the range of EUR 1.52-EUR 1.55 per share, or $1.67-$1.70 at current USD spot rates.
This replaces our original guidance of EUR 1.50-EUR 1.55 and excludes any impact of capital allocation. I will now turn the session over to Q&A. Operator, back to you.
We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. If you're using a speaker phone, please pick up your handset before pressing keys. To withdraw your question, please press star then two. At this time, we'll pause momentarily to assemble our roster. Our first question will come from Jason English with Goldman Sachs. You may now go ahead.
Hey, good morning, folks. Or perhaps it's good afternoon where you're at. A couple of quick questions. You mentioned, I think, Stefan, this is in your comments, you plan to recoup the inflation incurred in 2022 and 2023 collectively by year-end. My question is how? Are you expecting to have more list price increases or I believe you've tapered some trade on top of list price increases. Is the anticipation that you'll be able to pull back on some of that trade to get more effectively net price realization by year-end?
Well, it's a bit of a combination of everything to your point. At first, the first piece, Jason, we are well, you know, we are well embarked in terms of recovering the price increase. Don't forget, you know, that it's something which is obviously started last year. We have obviously the positive impact of 2022. We already had some positive negotiations early this year.
What's left is much lower. Don't forget, at the same time, you know, the inflation, input cost inflation has somewhat decelerated in the meantime, which is probably, you know, deceleration is probably higher or better than anticipated, which helps us as well. That's the piece, that's the macro piece where we stand. Yes, we're still left with some here and there, you know, some negotiation, but it's nothing comparable to what we had last year. Up with that, obviously, then you go into the consumers. Consumers is about obviously promo and all these things. It's much more about revenue growth management, and it has really become, you know, a big...
It's becoming more and more a big muscle for us, right now and also the for the coming months and years. That's where we stand, but maybe you can compliment, Sammy.
Yeah. Stefan, I think you said most of it. The one thing, Jason, I would insist on is actually the pressure for the coming quarters is actually much lower than what we had planned, given the, what has been executed so far and what we are seeing from an inflation trend. Stefan was alluded to the point of, let's say, a revenue growth management strategy, which we are really now leveraging full speed across the market to really make sure that we execute some of these intervention, if you want, on, let's say, in the right market and in the right category, to remain competitive versus the rest of the market as well. Clearly, we are on trend, if not a bit better on that.
Okay. You also commented in prepared remarks that private label gaps have not yet narrowed. Is that, like, they haven't yet narrowed all the way back? Are they narrowing, but just... Are you seeing progress on that front, I guess, is my... It's the core of my question. With the cost pressure perhaps moderating a bit, does that influence your expectations of how far you expect private label to go in closing those gaps?
It's a complicated question, Jason, because obviously it's not, you know, it's other people, so we can't, you know, second-guess what they're going to do. The only thing we can say is we're all subject to the same, let's say, constraints. The market is the market. You know, the fish is the fish, the vegetables are the vegetable. Our decision was, and it still is, by the way, to make sure as brand players, as brand leader, we want to obviously maintain our gross margin, so as to be able to reinvest. That's the very essence of a brand leader, and that's what we're going to do. What other people might decide to do with their margin is something else.
we haven't seen, you know, overall yet, you know, a very significant narrowing down of the difference. It may come, may not come, but, probably, you know, you should ask them at some stage.
Indeed. If I get a hold of them, I will. Thank you very much. I'll pass it on.
Thank you, Jason.
Our next question will come from John Baumgartner with Mizuho Securities. You may now go ahead.
Good morning. Thanks for the question.
Hey, John.
Hi, John.
Maybe first off, wanted to walk through the four Fortenova assets as we're heading into the peak season there and, you know, especially as you're lapping a tough comp on the revenue side. Are there any fundamental or structural improvements or enhancements you can highlight that you've implemented that are poised to benefit operations this year on the revenue side?
Well, to your point, the last year was a really great year, and believe me, we have all the intent to have another great year this year, with or without the weather. I think there are things that we are very much in line with the business model, by the way. We've improved. First, you know, you have a huge, let's say, number of freezers, in some way outdated. As expected, you know, we're improving all these freezers. I think it's... Memory is right. You have around 100,000 freezers across the older region, which is a great route to market, as you can imagine.
Some, you know, had to be outda- and some were outdated, and as expected, we're changing them, which is great and it's going to help us with the retailers and with the consumers. That's the first piece. The second piece is we're also improving, let's say, the quality of the factories. That was also part of the plan. The third piece, which is something we have learned since last year, is you probably need to, you know, to be ready on time, more ready on time in terms of inventory of finished goods because it's another game vis-a-vis frozen food. You have to make sure that you're going to be ready, let's say Q1 or even Q4, Q1, Q2, to deliver. It's quite different from frozen food.
You just can't rely on Q2 and Q3 to deliver your ice cream. Last year, we had some out of stocks because we hadn't fully, you know, grasped that piece and obviously we're learning. That's a third piece of improvement that we're coming up with. On top of that, you know, Well, the team is great, you know, in, with the Adriatics. They're doing a fantastic job. They've come up with a new taste, considered as among the best, you know, ice cream in the world. And it's going to come.
By the way, we also have opened a new avenue in terms of export, let's say to Austria, where, you know, you have a very sizable community of Croats there, especially in Vienna. As you know, we have a very strong distribution in this country. So if you go to Vienna, I would invite you to go to some of the stores there, for example, Spar. It's not advertising here, but it's. Then you will see some of the Ledo products.
They, you know, it's. We're very confident it's going to do well. Yes, very pleased with what we have, qualitatively and quantitatively. Okay. Thanks for that, Stefan
Yeah, I think and we have communicated, John, on our clear intent to step up our investment in A&P. As you have seen, I mean, over the past years, we had, let's say, taken it down really by trying to optimize the whole portfolio, but it's about time that we reinvest behind the assets that we have. I think that there's a number of things that we are really doing now, which is refueling effectively the level of spending behind our must-win battles. We do know that when we invest there, the payback is quite fast and strong because the brands are quite strong. Nevertheless, given the fact that the trend has been a bit down over the past years, it's just gonna take a bit more time than usual. Clearly that builds up if your sustainable growth as we move forward.
Investing effectively around equity, I mean, is very important. The Captain is a perfect example of that. We are clearly refueling effectively our investment, I mean, there. What pays back a bit faster sometimes is frankly more innovation driven, more effectively targeted to, let's say, coordination between in-store and equity investment when we try to have a bit of a holistic A&P intervention there, where we see faster returns, usually within the 9- 12 month-ish, whereas if you're the classic advertising investment, it's a bit on a longer payout there. We're clearly trying to balance the need for reinvesting behind must-win battles that are absolutely critical to bring them back on par with what is making growth strong and profitable. On top, trying to leverage any commercial option related to market dynamics.
For instance, let's say clearly cost of living intervention or innovation intervention or other limits. When we have Basa as an example coming up, of course we'll advertise that, and that has a clear return, I mean, much faster than the, than others.
You will see step of the investments.
Exactly, yeah.
starting really end of Q2 and then really Q3 and Q4.
Thank you very much.
Thanks, John.
Our next question will come from Peter Saleh with BTIG. You may now go ahead.
Great. Thanks for taking the question. I just wanted to ask on the pricing plans. I know you had a mid-teens pricing in the first quarter here. How should we think about your pricing for the balance of the year? Do you anticipate at this point in time taking any additional price, given you haven't really seen any deflation, maybe some just moderation in commodities? Just trying to understand how you're thinking about the pricing lever for the balance of this year.
Yeah, as we said earlier, the pricing, if you want, that is going to come is actually much less than what we had originally planned for the reason that effectively our first tranche that has happened in RGM has gone really well and has passed through. On top of that, if you want, we see, let's say, a lower pressure on inflation that is putting, if you want, the coming burden on the need to recover inflation through pricing lower than planned. Clearly at this very stage is definitely within a range of pricing intervention that will be much more moderate over the quarters to come. As we see far, we will be very specific because this inflation hits if you're different category in different market at a different level.
We try to make sure that effectively we go where it makes sense with the intent as well of taking advantage from an inflation standpoint on the fact that we are hedged at about 80%, as we indicated, and we have 20% unhedged. On this unhedged part, we intend to clearly leverage any positive opportunity in the market in case we have access to input cost at a lower price, which will reduce the pressure for pricing in the next quarters. Clearly, on par if not ahead and at this stage much more manageable as we move forward.
Great. Thank you very much.
Our next question will come from Cody Ross with UBS. You may now go ahead.
Good morning. This is Simon Nageon filling in for Cody Ross.
Okay.
You haven't-
Hi, Simon.
Hey there. You haven't repurchased shares since, first quarter of last year as you focused on securing inventory. When do you anticipate share repurchases being a bigger part of the capital allocation process again?
Well, we definitely, I mean, consider share repurchase as part of our capital allocation strategy, as we have mentioned, I mean, many times. The focus over the first quarter was clearly to stabilize the business as we are clearly getting into, let's say, inventory and receivable and payable at the time. Management at the time were executing pricing and securing the supply. As now we're getting out of this, let's say, clear transition quarter now, we clearly have the next quarter to look at, different options, I mean, appealing to us, whether this is effective share repurchase or other capital allocation strategy. Share repurchase remains very high on our agenda, and we've been opportunistic on that. As market goes, we will effectively execute our strategy as we move forward on that.
Great. Thanks so much.
Our next question will come from Steve Powers with Deutsche Bank. You may now go ahead.
Hey, good afternoon. I wanted to ask about your manufacturing savings. You target to step up in manufacturing savings entering 2023, and I guess just want to get a status check on progress there, how much you've already started to receive and that we've seen in the first quarter results versus how much is yet to build over the balance of the year.
Yeah. Definitely the program is in place. We have different axis, if you want, of development there. One was the pure manufacturing efficiency in the different sites that we had, clearly leveraging all the opportunities to implement our lean program activities in order to clearly reduce the conversion cost overall, taking into account the volume dynamic as much as effectively the utility and the efficiency dynamic or productivity dynamic that we have. The program is well in place and delivering good saving in line with the plan. It is a well spread plan over the quarter. What you see in Q1 is going to spread over the coming quarter. There was another range of intervention that we had made, which was more geared on product formulation and if your ability to meet the market needs in a very effective way.
Within that plan, we have made some of the interventions that are gradually being implemented. You can understand that whenever we touch products, we touch at different parameters such as packaging or go to market and pricing and others, and those are being deployed as we go. Very clearly, the investment and the focus is in there. A great team there that is implementing that. The inflation, as we said, I mean, is clearly going on the right trend. I mean, at this stage, and we have taken opportunity of the market opening to have access to input cost at a lower price. The selling flow is coming as planned and is reflected effectively on our overall performance as we move forward in line with our expectation.
Great.
On top of that, I also add, you know, logistics.
Yes, absolutely.
Where we're making a lot of progress, savings, and still a lot of opportunities ahead of us.
Okay, that's helpful. Maybe if I could, the other... You'd also communicated at CAGNY, you know, relatively sizable step up in innovation spending. I guess similar question, how much of that have we already seen? How much of that is yet to come? Just any early feedback on sort of the return expectations on that investment.
Well, the first one, as you may know, Steve, is about Basa or Pangasius in Continental Europe. It came out of necessity last year with obviously the outbreak of the Ukraine War. We've really moved from necessity to an opportunity for us. Since something like end of Q3 last year, we really started to develop, you know, that part of the new business, which is farm fish, which is great, by the way. The product is great. Now we have developed and launched Basa in four countries, Netherlands, UK, Germany, and France. It's doing well. We're making a lot of progress. We're planning to have another three countries by the end of the year.
That's innovation because it doesn't replace, you know, new products. It doesn't replace, you know, cod or pollock. It's really something new, and that's a big innovation. The second piece is more about the affordability, and we also have some very interesting, let's say, new innovations, especially in fish. These are the first two pieces where we have invested. More to come. Let's say, and one thing interesting as well, you may say it's innovation or not innovation, but the pizza in France, we were not present in France. We think we have the right reason to be present with pizza in France. We have the right distribution. Goodfella's is a great product.
Let's face it, you know, for reasons, you know, that are, let's say, linked to competition, there is a big wide space available there. We've seen, you know, we've, we had the conversation with the retailers, and they're very open. Then we have now you can feel, you can see Goodfella's Pizza with Carrefour, for example, in France, and with other retailers. That, that is also, you know, innovation. I love these innovations because they don't cost anything, by the way, because it's available. It's there, just not present in that specific country, which is great. The other piece is especially, you know, during this cost of inflation, cost of living crisis is renovation.
I think the big piece for us is to make sure our products, our brand products, are going to come up with superiority in terms of packaging, in terms of taste and all these things. That's, you know, short-term and mid-term, that's absolutely critical for us. These are the big pieces where we have invested. More to come, obviously, before, let's say, in the coming months for 2024 and onwards. These are the big themes we think are very much adapted to the current situation.
Very helpful. Thank you very much.
Our next question will come from Rob Dickerson with Jefferies. You may now go ahead.
Great. Thanks so much. Apologies if you already went through all this. Hopped on late. It's just a kind of question around, you know, trade spending, promo, kind of vis-à-vis the gross margin. Clearly, in first quarter, gross margin was great. I think originally coming out of Q4, you had said, there would be like a sequential progression in gross margin.
Now gross margin is still flat, so it doesn't seem like there's probably sequential progression really, you know, still occurring because a lot of it was front-end loaded. Do you feel like, you know, kind of where you see the marketplace today and kind of what you had budgeted, I guess, in trade promo, kind of is steady? Or do you think you might need a little extra room kind of as you get through the year, to maybe lean in to make sure you're getting the velocities? Again, just asking kind of, you know, as it pertains to the, kind of the delta and the gross margin flow. That's it. Thanks so much.
Yes. Hi, Rob. I, yes, it's very much in line, frankly, with what we were expecting. I mean, the one thing though that we have looked at more thoroughly in the context that we've been facing with a good quarter behind us is effectively whether looking at our Revenue Growth Management strategy, whether there could be some surgical intervention to be made on some key country category combination where we are clearly running behind from a share momentum standpoint and looking at opportunities to do so. Don't expect, if you want, moving forward a massive change there, but much more targeted intervention to really, let's say, maintain a price gap that is, let's say, conducive of growth overall or potentially opportunity to reignite growth on some of the category where clearly we've taken pricing and where clearly we may have to be more competitive promo-wise.
This continues to remain the category, that is heavily, promotion-driven. We clearly have a very strong promotional plan, I mean, across the vast majority of the market. Wherever we have opportunity to be more surgical to ignite a stronger growth and regain, share momentum, definitely we look at that. As I said, it's gonna be more on a country-by-country, category-by-category basis.
Okay, great. Maybe just a quick clarification follow-up. When you talk about, the strategic pricing, you know, kind of dependent on end market positioning, is that kind of away from Portanova? I just think of, you know, kind of handheld ice cream, you know, in Eastern Europe at the beach. Like, people aren't really buying on promo. It's really you're kind of talking more about those core categories, really more frozen fish, frozen veg maybe. Is that right?
Yeah, we're looking at that. I mean, on Fortenova, we have actually started the work as well to see if there were opportunities there to more on the growth side, profitable growth side than anything. I would say the majority of the emphasis in on the more core categories, the non-ice cream category.
All right, great. Thanks, Sammy.
Thanks.
If you have a question, please press star then one. Our next question will come from Jon Tanwanteng with CJS Securities. You may now go ahead.
Hi. Good morning. Thank you for taking my questions, and congrats on the strong results. Sammy, I didn't know if you addressed this previously, but did you mention how you're expecting gross margins to trend through the quarters, just on a cadence perspective, is there anything different from your normal seasonality or are there some puts and takes that we should be thinking about?
No, we maintain the guidance, which is effectively about flat margin, I mean, for the year. The bump we had in Q1 was expected and is gonna then effectively deliver, I mean, it's gonna lead us to deliver in line with expectation on that.
Okay, great. Can you give us an update by region, what you're seeing, if there's been any surprise in any of your end markets? I know there's been protests in France that have been fairly disruptive to other industries. Just tell me if there's anything that's surprising, either good or bad in the countries that you're in.
No, I would say nothing in short of a surprise. I mean, pretty much in line with the expectation if you want on that one. We had actually great customer service and performance, I mean, overall. The spread of the performance over the quarter has been consistent with our expectation as it shows if you want on the gradual share development that you see, but nothing of significance.
They're different, let's say region by region by definition, but they're not. They haven't come up with any surprise region by region.
Yeah.
Okay, great. Then last one for me. Can you give us an update on Green Cuisine? Number one, how that's doing, and number two, just how your sustainability initiatives, which you've had a lot of and have talked about a lot of them, how have those been received by your retail partners and your consumers, your end consumers? Is that something that even comes up on the radar in times of stressed budgets and is that you're pushing? Just to help us understand where your positioning is on that front.
Okay. Let me start with the two questions actually, John, if I understand you well. The first one is about Green Cuisine. Actually, in terms of Green Cuisine, you know, last year, you know, to your point, I mean, we had the flat sales in the category declining by 9%. To your point, I think we had a share gain of 2%, which is we are the number two player in frozen food plant protein. This year, you know, we're growing faster than the others. This year, we're up slightly in terms of market share with a country like Germany, for example, performing extremely well, growing at 10%, and share up 10%. Italy is up as well. Overall, you know, we're very pleased.
This being said, when you take, you know, I think when you take the, the category, so it's a very interesting category, and we really believe that the category has a long-term role to play. I think what we also have seen is after a lot of excitement, people started to reconsider. They Habit need to change, which is not unusual, by the way. I think a lot of categories have been through that kind of trends. I think it's up to us leaders to rein the game, and to come up with the right products, or the right combinations. The right price. Do I believe, yeah, that there is a long-term future, as I said? Yes.
Definitely, you know, I think, the consumers remind us, all of us, by the way, much more than others or for others, by the way, that, you know, it's, you never take people for granted, which is great. That's exactly what we need to do. In terms of sustainability, well, you know, we just published our sustainability report, I think it is today. I would really invite you, John, to go through, you know, even at the very least, the headlines. Well, it is really strong. When you see the numbers we have in terms of, let's say, for example, sustainable fish, in terms of sustainable agriculture, in terms of healthy food, in terms of SBTI, quite frankly, it's something we can...
I'm not saying that lightly, by the way, because I'm more of the, you know, easily dissatisfied. It's really impressive. Back to your point about how does it sell then? I can tell you, the retailers, starting with the retailers, they also have their programs. They need people like us to come with programs that are very much in line because they have also their carbon footprint programs and all the rest of it. They need obviously to have a consolidated view. With people like us, you know, I can tell you, I will not mention any names, but I can tell you we have a very solid conversation, very fruitful, let's say conversation with some of these retailers, and I think it's only starting.
As we're talking about the consumers, I think we can do more. We can do better. I think when I, again, when I see the numbers we have, I think, that we need to do ourselves a better job. That's my non-satisfactory part of myself that is coming back. where we can do a better job at coming with these numbers, because these are facts. you know that, you know, we perform extremely well with, for example, Wall Street, you know, in terms of where we stand in terms of sustainability, but more to come.
Quite frankly, I think we are too modest from that standpoint, given the facts we are coming up with. It will change, I can tell you. To the satisfaction of the retailers, the consumers, and ultimately to our satisfaction.
Got it. Thank you. Thank you very much, Stefan. It's very helpful.
Please read the report. It's really interesting.
This concludes our question and answer session. I would like to turn the conference back over to Stefan Descheemaeker for any closing remarks.
Thank you, operator, and thank you for your participation on today's call. We got off to a solid start for the year, and we remain on track to deliver our promises. We believe frozen food remains the best value for consumer across food, and we remain proud category leaders. We are focused and committed to delivering our ambitious financial objectives for 23rd and beyond. Thank you all. Operator, back to you.
The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.