Quorn owner Monde Nissin continued to witness “softness” in meat-alternatives, although the second-quarter sales decline was less pronounced.
It was a mixed bag of results in the three months to 30 June for the meat-free category as Philippines-based Monde Nissin reported a rebound in gross profits and margins but a widening in EBITDA and net losses.
However, the company’s core Asia Pacific branded food and beverage business (APAC BFB) posted a 5.7% increase in comparable sales to 16.46bn pesos ($287.2m).
Group sales, including meat-alternatives and APAC BFB, rose 4.2% to 19.82bn pesos on a compatible basis.
CEO Henry Soesanto said: “For our meat-alternative business, we saw some gradual improvement in gross margin, which we expect will be maintained and improved upon as the year progresses as our focus remains on optimising costs and looking for efficiencies with the goal of maintaining EBITDA neutral or better for the year.”
As the EBITDA outlook was maintained, Soesanto added in terms of the group performance: “During the second quarter, APAC BFB saw modest top-line growth and continued expansion of gross margin and core net income on a year-on-year basis.
“Our APAC BFB gross margins have substantially rebounded from last year’s levels, and while we believe further sequential gains will be limited, we expect to see continued improvement in Q3 on a year-on-year basis.”
In a follow-on call with analysts, Soesanto said that “despite continued challenging business conditions” in meat-free the margin improved as input costs start to ease.
Monde Nissin’s comparable second-quarter sales in meat-free fell 2.7% to 3.37bn pesos, in comparison to a 4% decline in the opening three months. The metric is adjusted for a change in accounting standards in the final quarter of last year.
However, Nick Cooper, the CFO of the Quorn business division, said underlying sales, adjusted for customer de-stocking, were down 9%. That decline was comparable to the opening three months, he added.
“This top-line trajectory is worse than we'd anticipated at the start of the year and is largely driven by the fact that the UK retail market continued to decline double-digits in the quarter,” Cooper explained.
“In this environment, we're very much focused on protecting cash and profitability, while at the same time funding targeted investments to drive a return to top-line growth.”
Breaking down the numbers by channel, Copper said meat-alternative sales in UK retail fell 10.2% in the quarter, resulting in a “small erosion” in Quorn’s market share.
For foodservice, he quoted numbers on a daily basis, with sales up 8%. Out-of-home sales made up 20% for the category over the quarter, including “further expansion” of the business with fast-food chain KFC.
Elsewhere in the meat-free results, gross profit rose 3.9% to 778m pesos, having dropped 14.5% in the opening quarter. The margin increased 146 basis points to 23.1%, rebounding from a 376-point decline.
EBITDA for the category remained in the red, at 84m pesos from a year earlier. A 60m pesos loss was reported in the first quarter, narrowing from a 116m peso loss in the corresponding period of 2023.
Meat-free net losses were 270m pesos. A 216m peso loss was reported in the opening three months of the year.
During a question and answer session with analysts, Quorn CEO Marco Bertacca was asked for some insight into the trading environment for meat-alternatives and volumes.
“I think the key element that we are monitoring is really the UK retail environment because currently we see some relative growth in Europe and in foodservice, while the UK retail environment is still under pressure,” Bertacca responded.
“We are the market leader here and we need to continue to consolidate or to strengthen our gross margin in order to be able to invest in consumer attractiveness propositions.
“Certainly, we expect for this year and possibly also for next year some pressure on volume, and we are continuously looking at ways to optimise our footprint to adjust for that so that we can become stronger for the future.”
