Growth stocks are always a favorite among investors, and Nomad Foods Ltd. (NOMD, Financial) is a growth stock. This leading frozen foods company posted strong second-quarter results on Aug. 24, including a 0.48% increase in total revenue. Net profit for the first six months increased 92.84%.
Headquartered in Feltham, United Kingdom, Nomad Foods is the leading branded frozen food player that manufactures and distributes frozen foods (fish, vegetables, poultry products, ready meals and others) primarily in 17 countries in Western Europe holding a 13.8% market share of the frozen food market. The company’s portfolio of frozen food brands includes Birds Eye, Iglo and Findus.
Strong second-quarter results
During the second quarter ended June 30, the company’s total revenues increased 0.48% to 458.1 million euros ($546.57 million), compared to 455.9 million euros for the comparable prior-year period. Gross profit for the reported quarter increased 3.37% to 144.3 million euros compared to 139.6 million euros in the prior year. The gross profit margin increased 31.5% from 30.62% in the same period last year.
Nomad Foods’ operating profit amplified 492.78% to 57.5 million euros, compared to $9.7 million a year ago. Operating profit as a percentage of total revenues increased 12.55% from 2.13% in the same period last year. Adjusted operating profit increased 7.05% to 69.8 million euros.
Net profit increased to 19.3 million euros, or 0.11 euros per diluted share, compared to a net loss of 7.3 million euros for the comparable prior-year period. Adjusted net profit increased 19.49% to 42.3 million euros, or 0.11 euros per diluted share compared to 35.4 million euros or 0.23 euros per diluted share for the comparable prior year period. Net profit as a percentage of total revenues for the reported quarter was 4.21%.
The company’s EBITDA accelerated 199.1% to 67 million euros compared to 22.4 million euros for the comparable prior-year period. Adjusted EBITDA increased 1.8% to 79.3 million euros compared to 77.9 million euros in the year-ago quarter.
Nomad Foods’ cost of sales decreased 0.79% to 313.8 million euros compared to 316.3 million euros. Cost of sales as a percentage of total revenues decreased to 68.5% compared to 69.38% in the prior-year period. Other operating expenses almost remained flat to 75.3 million euros.
Nomad Foods ended the quarter with cash and cash equivalents of 300.5 million euros, a decrease of 8.80%, compared to 329.5 million euros in December 2016. Inventories for the reported quarter decreased 4.86% to $309.2 million compared to 325 million euros in December 2016. Total noncurrent liabilities decreased 0.4% to 2.046 billion euros compared to 2.054 billion euros in December 2016.
First six months results overview
The following chart shows the company's financial results for first six months of 2017.
| Metrics | Six months ended June 2017 | Six months ended June 2016 | % change |
| Total Revenues | €989.4 million | €1003 million | (1.37)% |
| Gross profit | €300.4 million | €307.1 million | (2.18)% |
| Operating profit | €132.8 million | €74.1 million | 79.22% |
| Adjusted operating profit | €146.3 million | €152.9 million | (4.32)% |
| Net profit | €67.3 million | €34.9 million | 92.84% |
| Adjusted net profit | €87.7 million | €88.4 million | (0.79)% |
| EBITDA | €154.6 million | €98.9 million | 56.32% |
| Adjusted EBITDA | €168.1 million | €177.7 million | (5.4)% |
| Cost of sales | €689 million | €695.9 million | (0.99)% |
| Other operating expenses | €156.2 million | €154.8 million | 0.90% |
| Net cash provided by operating activities | €138.3 million | €151.7 million | (8.83)% |
Projections
For fiscal 2017, Nomad Foods expects organic revenue growth at a low-single digit percentage rate. Adjusted EBITDA are expected to be in the range of 320 million euros to 325 million euros, which implies high single-digit percentage growth as against 2016 excluding foreign exchange translation headwinds and reinstatement of bonuses in 2017. Further, the company expects its adjusted free cash flow of at least 200 million euros for fiscal 2017.
Growth strategies
To attract more and more customers in its arena, Nomad Foods has redirected resources behind “Must Win Battles.” This “Must Win Battles” is a strategic cross-portfolio evaluation that focuses on core products (fish fingers, spinach and peas), coordination of product innovation, packaging renovation, in-store execution and media.
To drive growth, improve efficiency and improve customer experience, the company plans to prioritize distribution opportunities, optimize price pack architecture, increase trade terms conditionality and upgrade capabilities and resources.
Management
On Aug. 24, Nomad Foods appointed Mohamed Elsarky to its board of directors. Elsarky’s vast experience within consumer goods will help the company expand its global packaged foods.
On a concluding note
Nomad Foods is a rock-solid company with a strong balance sheet, remarkable white space opportunity and experienced management team. The company’s main goal is to transform itself into a leading global consumer foods company. With its recent quarterly report, the company is headed toward a bright future and is set to deliver greater shareholder returns.
Disclosure: I do not hold any positions in the company.
