Feltham, England-headquartered Nomad Foods, parent company of Birds Eye, Iglo and Findus frozen food brands distributed throughout Europe, on March 30 reported a 2% decline in gross profit at €135.9 million for the fourth quarter of 2016, compared to the same period the year before. Revenue of €485.2 million was down 6.8% from €520.8 million generated during Q4 2015.
Meanwhile, a new element of the company’s strategy for future growth will include extending its market reach beyond Europe and selling retail products offered outside the freezer section of supermarkets and grocery stores.
For the year ending on December 31, 2016, sales of EUR 1,927.7 yielded an after-tax profit of €36.4 million. Revenue fell by €124 million, or 6%, year-on-year.
As has been the case throughout 2016, the decline in sales was attributed to the company’s three largest markets – the UK, Italy and Germany. However, according to a statement issued by Nomad, activity in those countries “has shown a steady improvement each quarter in the rate of decline year-on-year, with Germany returning to growth in the three months ended December 31.”
Gross profit fell €33.7 million, due mainly to lower sales volumes. Adjusting for currency impacts and the like-for-like impacts of the exit from Russia, an additional trading day in the first quarter of 2016 thanks to leap year, chart of account alignments and the acquisition of La Cocinera in Spain, the decline was €18.7 million. This was on account of lower sales volume, operational issues in Sweden during the first half of the year, raw material shortages in Italy until the end of the third quarter, and the weakening of the euro against the US dollar. Better pricing and promotional management provided considerable mitigation to these impacts.
Comments on Results
CEO Stéfan Descheemaeker, putting a positive spin on the results, said that 2016 “marked an important milestone for Nomad Foods” as the company “made meaningful progress against our objectives.”
How so?
“Firstly stabilizing sales by progressively slowing the rate of decline in the top line through the execution of our ‘Must Win Battles’ strategy,” he stated. “Secondly delivering on our synergy commitments from the Findus acquisition, and thirdly generating strong cash flow to drive consolidation within the global food industry.”
The CEO continued: “We believe our ability to generate significant cash flow, along with an improving operational foundation, positions us to consider strategic acquisitions in 2017 and beyond. We continue to make excellent progress with like-for-like sales moving into positive territory in the first quarter of 2017, an encouraging development that we expect will continue throughout this year.”
Noam Gottesman, Nomad Foods’ co-chairman and founder, commented: “We delivered growth in our core portfolio during the fourth quarter of 2016, and will stabilize our top-line during the first quarter of 2017. Our strategy is clearly working.”
On Acquisition Trail
“Acquisitions will be a key driver as we actively pursue opportunities in both frozen and non-frozen, and geographic expansion into new markets, including the US,” commented Descheemaeker. “We believe our ability to generate significant cash flow, along with an improving operational foundation, positions us to consider future strategic acquisitions that span beyond the frozen category, and with global geographic reach.”
Paul Kenyon, chief financial officer, added: “We do continue to scan European frozen because we see opportunities there that would be highly synergistic, but I think the fact that we are seeing the base business stabilize gives us the confidence to look further afield. So, we would not necessarily limit ourselves to European frozen assets.”
