Prepared remarks
Ladies and gentlemen, greetings, and welcome to the Nomad Foods Second Quarter 2026 Earnings Q&A Session. Operator provided instructions. As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Jason English, Head of Corporate Strategy and Investor Relations. Thank you. You may begin.
Thanks, Max. Hello, and welcome to Nomad Foods Second Quarter 2026 Earnings question-and-answer session. We've posted the associated press release, prepared remarks and investor presentation on Nomad Foods website at nomadfoods.com. I hope you all had a chance to review them. I'm Jason English, Head of Investor Relations and Corporate Strategy, and I'm joined by Dominic Brisby, our CEO, and Ruben Baldew, our CFO. During this call, we will make forward-looking statements about performance 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 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 represents adjusted figures. All adjusted figures have been adjusted primarily for, when applicable, share-based payment expenses, related employer payroll taxes, exceptional items, foreign currency translation charges or gains and hedge ineffectiveness. Unless otherwise noted, comments from here will refer to those adjusted numbers. With that, Matt, let's open the line to questions.
Questions and answers
Operator provided instructions. Our first question is from Andrew Lazar with Barclays.
Maybe to start, Dominic, as you think through the back part of the year and the cadence of how you expect market share to unfold because that's the one area where, as you note in your prepared remarks, some of the disruptions in the first half led market share not to be where you wanted despite the category obviously accelerating nicely. Is it unreasonable to expect market share to be more neutral by year-end? Or is there something else that would prevent this now that much of the retail disruption is behind you and competitors are also starting to take price? I'm trying to get a sense of whether there is something more structural regarding the ability to hold or gain share as you go forward.
So Andrew, thanks for the question. The retail disruptions were a meaningful headwind to our share in the quarter. We certainly expect our performance to improve in the second half. As you pointed out, those disruptions are now behind us. We're also encouraged to see the recent pricing actions of private label. That said, we still have more work to do to improve our competitiveness. We're making significant progress. We expect to deliver better sales and market share performance in the third and fourth quarter, but it's probably going to take more time to get back to market share neutrality. I don't, however, see any reason that we cannot get there over time. In fact, we've developed what we think are very compelling plans that are designed to achieve just that. We're looking forward to sharing those plans with you at our Analyst Day in October.
And then what sort of elasticity are you seeing thus far on your more recent pricing actions? And how do those compare relative to historical levels?
It's a little early to talk about where price elasticity is. In most cases, private label have only just increased prices, although we are starting to see quite meaningful price increases coming through. For example, in the U.K., certain retailers increased prices 20% to 30% mid-July; Carrefour increased on certain SKUs in France by 32%. In Germany, Aldi, Edeka and Rewe all raised prices by about 20% in most of the fish categories. However, we're still analyzing what the real sell-out data is. At this point, it's too early to draw any meaningful conclusion.
But it sounds like you're being, correct me if I'm wrong, prudent with respect to elasticity assumptions in the way you guided for the full year around organic sales.
Thank you.
Operator provided instructions. Our next question is from Steve Powers with Deutsche Bank.
Going back to the retailer disruptions in Germany and France. In the prepared remarks, you talked about them as being behind you and being resolved, but you also used language that alluded to largely resolved. Can you be a little more specific on exactly where we are today versus full resolution? And if not fully resolved, how much allowance have you made for carryover disruption in the third quarter and second half?
With the exception of certain small retailers and tiny markets, these are fully resolved. In the case of Germany and France, we're now in good shape. You can consider these as resolved.
Maybe you could also talk a bit about the ongoing productivity work within the business. As I think about the early earnings bridge into '27, I'm trying to get a sense of the biggest contributors to profit growth and the ability to drive incremental productivity as part of that bridge. How are you thinking about that and how are your plans evolving on that front?
Thanks, Steve. It's a good question, and let me link it to Andrew's question. We are on track with our EUR 200 million productivity program. If you look at what we posted in terms of our nonrecurring spend, you'll see that it has gone down. What we are spending, we're spending on programs linked to productivity. We announced a restructuring in part of our marketing function. You saw that in quarter 2; we also announced a factory closure. We are moving ahead, and it is in line with planning. Another point linked to elasticity is we're not pricing as much as we used to in 2022 and 2023. We're using our productivity program to enable competitive pricing to make sure that our price index doesn't go up further. We have actually seen our price index decrease a bit, and that is because of the productivity program. The overall message is we will continue to drive it; it is on track, and we'll use it to be competitive on pricing. We're seeing the first results of that in the market.
Our next question is from Scott Marks with Jefferies.
In the prepared remarks, you called out some things that helped support your margin expansion in the quarter, and you spoke to some one-time benefits or phasing benefits that might reverse later this year. Can you help us understand what those are, what the magnitude is, and how we should think about timing for those to reverse?
Thanks, Scott. The main message is you see a return to gross margin growth, driven by pricing kicking in. That's fully going to plan, as we said after our quarter 1 results. There is some phasing: we see a couple of million of phasing in A&P and overheads, and we had some variances related to recipe variances, which is also EUR 1 million or EUR 2 million. But overall, the gross margin improvement is coming through from pricing, and there's nothing material in phasing beyond those items.
Regarding the pricing actions, there were comments in the prepared remarks about your team feeling confident in being able to take incremental pricing in Q4 and into next year given what competitors have been doing and what you're seeing on inflation. Have you started those conversations yet? If so, what's been the response from retailers?
We have started having those conversations. Most of the inflation we're seeing is centered around fish. As I pointed out, we've started to see private label increase already in a number of countries. We've used some of this opportunity to allow our own price index to go down slightly. The price increases we're talking about are cost-justified, and we feel fairly confident in our ability to take these successfully towards the end of this year.
On capital allocation: you noted a suspension of share buybacks to pay down debt. What leverage ratio do you believe is appropriate in the current environment? Do you have a timeline to get there?
We're not putting out a specific leverage ratio. As Dominic said, we'll come back with more detail at our Analyst and Investor Day this fall. To be clear, we haven't done buybacks in the last quarter. We continue to pay dividends, which we just announced again, and we will now focus on deleveraging to bring interest payments and interest cost down.
Our next question is from Jon Tanwanteng with CJS Securities.
Could you go into more detail on your market share expectations? You said it might take a while to get back to neutral. Do you have any specificity on when you expect to get there? Is it Q1 next year? And is it in your plan at some point to start retaking market share and have growth above market?
It's absolutely in our plan to start taking market share. We'll be discussing those plans at our Analyst and Investor Day in October. While we're making good progress and expect better share performance in Q3 and Q4, it's going to take more time to get back to market share neutrality, and we're not giving specific timing today. It's worth pointing out that the category is performing well: year-to-date the frozen category in our markets is up 3.4% in value and 1.6% in volume. In the last three months, it's up 2.8% in value and 1.1% in volume. Once we hold or grow share in that context, it can have a significant impact. We're not providing clarity on exactly when that will be.
Can you talk about potential impacts from weather or other external issues like water shortages and how that might be impacting supply or demand in the current quarter? Is that anything more than you normally see?
Dominic noted that the last three months are roughly in line with year-to-date performance: 3.4% versus 2.8% in the last three months, so the category has come down a bit but not a big difference. The category remains strong. On water shortages, we're not seeing a direct impact now. Harvest is ongoing, and we'll see what that means. The additional inflation we're seeing this year is in fish. If you look at our cost of goods, a big part relates to proteins, primarily chicken and fish, which are less related to water shortages.
Our next question is from Peter Saleh with BTIG.
Dominic, you've been in the seat for a couple of quarters now progressing through this turnaround. What, if anything, has surprised you as you progressed? How has your thinking changed on the turnaround over the past couple of quarters? Anything you can share would be helpful.
A couple of things have become very clear. First, the robust health of the category: the frozen category is showing decent levels of both value and volume growth. I was aware of this before, but it's been positive to see it continue through geopolitical and consumer uncertainty. Second, getting to know the brands and the underlying data has reinforced how strong our brand equity is versus competitors and private label. So we're in a very strong category with the best brands. At the same time, it's been clear within Nomad that to become a much more competitive and successful company, significant changes were needed. You've seen changes to the leadership team and the executive team. There was a need to bring in strong new talent while retaining existing talent, which required substantial changes at the top and related cultural changes. Overall, I'm happy with what I've seen: great category, strong brands, and we're getting the organization to where it needs to be to be truly competitive in the market.
Over the next couple of quarters, what's the next area of focus for you? Is it innovation, marketing, or something else? Help us understand where you'll be focusing your attention over the next six months.
We've developed what we think is a compelling value creation plan for Nomad for the coming years. It includes every aspect of the business: innovation, how we manage marketing, how we drive our sales organizations, how we improve productivity, and more. There's been intense work over the past six months, and we believe the plan is strong and makes us excited about the future. We'll present the full plan at our Analyst Day in October. It covers the entire spectrum of what we're doing.
We have reached the end of the question-and-answer session. I would like to turn the floor back over to Dominic Brisby for closing comments.
Thank you all for joining us today and for your interest in Nomad Foods. I look forward to speaking with many of you in the days and weeks ahead and then seeing many of you at our Analyst Day this October.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.