Nomad Foods, the owner of brands such as Birds Eye, Aunt Bessie’s, and Goodfella’s, has reported a second consecutive quarter of volume growth despite the business being impacted by a flawed implementation of new software.
During the third quarter to 30 September, the group’s total revenue increased 0.8% to €770m. Organic revenue growth of 0.3% was driven by a volume uplift of 0.7%, continuing the improved trend seen in the previous quarter despite an approximate 2.5% hit related to disruption caused by the rollout of new Enterprise Resource Planning (ERP) software in certain markets. This was offset by a price/mix decline of 0.4%.
Nomad Foods had returned to volume growth in the previous quarter after advertising and promotions helped it win back consumers following a prolonged period of hefty price rises.
In the latest period, the group’s gross profit jumped 14.5% to €248m after margin increased 390 basis points to 32.3%. Nomad Foods stated that this was driven by supply chain productivity gains, positive product mix performance, and lower-than-planned promotional investment as it curtailed in-market support to manage inventory during its ERP transition.
Adjusted EBITDA climbed 19.0% to €166m due to the aforementioned factors. However, the group downgraded its profit guidance after a “greater than anticipated” impact from the ERP issues on its service levels, which it claimed are now returning to normal.
Full-year adjusted EBITDA is now expected to grow in a 3-5% range versus a 4-6% previously, with organic revenue growth of 1%-2% versus the 3-4% prior guidance.
“The European Frozen category remains healthy, and our market share returned to volume and value growth this quarter as innovation, marketing and merchandising investments yield positive results,” said Stéfan Descheemaeker, Nomad Foods’ Chief Executive.
“Growth continues to be driven by our higher margin Must Win Battles and Growth Platforms. Furthermore, revenue growth management and productivity programs combined with favourable price net-of-cost due to promotional timing in the quarter fueled margin expansion. This is evidenced by our record-high gross margin of 32.3% this quarter, allowing us to invest back into our business.”
Noam Gottesman, the company’s Co-Chairman and Founder, added: “I am increasingly encouraged by the improved underlying trends at Nomad. The new commercial flywheel and innovation framework that we adopted last year is bearing fruit and validated by our return to market share growth, notwithstanding the curtailed support levels due to ERP implementation in the period.
“The innovation and marketing plans for the remainder of this year and next are exciting, and I am confident that the improved fundamentals we are currently experiencing will continue.”
