Nomad Foods Ltd
NYSE:NOMD
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Nomad Foods Ltd
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Hello, and welcome to the Nomad Foods Second Quarter 2021 Earnings Call. I'm Taposh Bari, Head of Investor Relations, and I'm joined on the call by Stefan Descheemaeker, our CEO; and Samy Zekhout, our CFO. On our call today, we will review our financial results for the quarter and conclude with a question-and-answer session. [Operator Instructions]
Before beginning, I would like to draw your attention to the disclaimer on Slide 2 of our presentation. This conference call may make forward-looking statements that are based on our view of the company's prospects, expectations and intentions at this time, including consideration related to the impacts of COVID-19. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and this slide in our investor presentation, which includes cautionary language.
We will also discuss the 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 for 2020 and 2021. All adjusted figures have been adjusted for exceptional items, acquisition-related share-based payment and related expenses as well as noncash foreign exchange gains or losses. All comments from here on will refer to these adjusted numbers.
And with that, I will hand the call over to Stefan.
Thank you, Taposh, and thank you all for joining us on the call today. Earlier today, we reported our second quarter 2021 results, which marked the highest second quarter adjusted EPS in our company's history despite the anniversary for most difficult comparison of the year. The power and resilience of our value creation model was evident during the quarter as contribution from M&A, share repurchases and margin expansion more than offset an expected organic revenue decline. Based on our year-to-date performance in our plans for the second half, we remain confident in achieving our 2021 full year guidance, which calls for another year of organic revenue growth and double-digit adjusted EPS growth. Further, with the pending acquisition of Fortenova's Frozen Business, we expect the 2021 adjusted EPS base of over $2 per share on a combined and annualized basis. This will create a higher new baseline from which we expect to grow in the coming years.
With that, let's jump into the details of Q2, beginning with the highlights on Slide 3. Total revenues were down slightly as an expected decline in organic revenue was offset by contribution from the acquisition of Findus Switzerland and favorable ForEx translation. On a 2-year basis compared to 2019, total revenues grew at a CAGR of 5% and organic revenues grew at a CAGR of 4%. Adjusted gross margins expanded 50 basis points or 90 basis points on a like-for-like basis when excluding the effect of Findus Switzerland whose initial gross margins are below those of our base business. We are pleased with these results as we continue to navigate a dynamic inflationary backdrop. Adjusted EBITDA grew to EUR 123 million, representing 4% growth versus last year and an 11% CAGR versus 2019. And finally, adjusted EPS was EUR 0.40 per share, representing 18% growth versus the second quarter of 2020 and a 2-year CAGR of 22%.
Shifting now to the details of the quarter. We achieved strong performance despite the easing of restrictions across Europe and the anniversary of the COVID-related demand a year ago. Growth in the frozen food category remained elevated on a 2-year basis, but did normalize versus the first quarter when most of Europe was under lockdown.
Against this backdrop, we experienced sequentially improving market share trends during the second quarter, with market share in May and June both increasing versus the prior year period. Our market share improvement has been enabled by better supply and service levels, which after dipping to the low 90% range earlier this year have returned to the high 90% since May. We are encouraged to see a positive market share inflection and expect this momentum to be through the rest of the year.
Confidence in our growth expectations for 2021 is supported by strong underlying fundamentals within our core portfolio. Improved capacity is leading to more normal promotion activity, and in turn, particularly strong market share performance in our core categories such as fish fingers, coated fish, peas, spinach and Green Cuisine. Green Cuisine continues to be a key driver of both absolute growth and share gains as we build distribution, grow penetration and drive trial across our European footprint. Our chickenless range has performed exceptionally well since being introduced late last year, and early signals of our recent fishless launch in Germany are very encouraging.
Further with the Tokyo 2020 Olympic games underway, we are thrilled to have Green Cuisine to be the official plant-based sponsor of Team GB in the U.K. as we democratize the meat-free category. One of our incredible athletes, Max Whitlock, has already won a gold medal on the Tokyo games. Congratulations, Max. We have several 360-degree activations underway and are excited to bring them to life with the help of Max and our other sponsored athletes.
In 2 short years, Green Cuisine has become one of the leading meat-free brands within Europe and now has nearly 14% share of the frozen meat-free category across Western Europe. Consumers love our products, and we continue to believe we have every right to win in this exciting white space growth opportunity.
Our second quarter performance was also helped by strength in foodservice, which grew over 40% versus the prior year period. While this business is still down double digits versus pre-COVID levels, it is recovering nicely. And given the strong rate of growth, it's providing a meaningful contribution to the overall performance of the business. We expect this to be a recurring theme for at least the next 3 quarters.
I'd like to shift now to the topic of inflation. Since presenting at CAGNY 5 months ago, we stated that we expect to manage inflation in the low single-digit percentage range this year despite rising commodity costs. Between the actions taken by our procurement team, the length of our covered positions, favorable ForEx tailwinds and the nature of our COGS basket, we've seen limited inflationary pressure on our P&L for most of this year and have not yet had a need for significant price increases. As a result, our gross margin guidance for the year remains unchanged, and we are pleased to be in a position to reiterate our 2021 earnings guidance. I'd like to applaud the efforts of our organization for their exceptional work.
And that said, similar to many other food companies in the market, we are experiencing a real uptick in raw material inflation noticeably in all packaging, freight and logistics. As we have in the past, we will deploy our entire suite of levers, including productivity and price to protect our margins and ensure that we can continue to deliver against our steady growth algorithm for years to come.
Lastly, we prepared for the acquisition of Fortenova with the refinancing of our last portion of our debt. As a result of this transaction, we were able to: one, significantly reduce our like-for-like interest rates; two, extend our maturities; and three, generate EUR 400 million of incremental borrowing capacity. Taking all of these factors into consideration, we expect the net increase of our higher interest expense to be marginal despite taking on an incremental EUR 400 million in debt. We are eager to close on the Fortenova transaction at the end of Q3 and look forward to integrating the business and brands into the Nomad Foods portfolio. As a reminder, this is a transaction that we expect to be strategically and financially impactful for years to come.
From a strategic perspective, Fortenova will expand our geographic reach into 8 Central and Eastern European countries new to Nomad, mainly with leading market share positions. It will also introduce us to ice cream, a new and high-margin category, which will create a nice, seasonally hedged frozen savory service business during the summer months. The business also has significant exposure to out-of-home consumption and international tourism, creating a cyclical tailwind as the world returns to life after COVID-19.
Financially, we expect Fortenova to be high single-digit accretive to adjusted EPS in its first full year prior to synergies. This transaction is expected to increase our adjusted EPS to over $2 in 2021 on the combined and annualized basis. We expect this to set a new baseline for growth in 2022 and beyond as we build on momentum in our base business, realized Fortenova synergies and allocate excess capital in an accretive manner.
In summary, we are pleased with our second quarter results and remain on pace to achieve our guidance for the year. We have an active commercial agenda over the coming months, which we expect to result in market share gains, growth in our international business and the recovery in foodservice. We will continue to mitigate inflation by driving productivity and raising prices where justified. We are building Green Cuisine into one of the largest and fastest-growing plant protein brands in Europe, attracting new consumers into our portfolio and driving innovation within the frozen food aisle. And finally, we expect that the pending acquisition of Fortenova will serve as a new catalyst for growth in 2022 and beyond.
With that, I will turn the call over to Samy to review the financials and guidance in more detail. Samy?
Thank you, Stefan, and thank you all for your participation on the call today. Turning to Slide 9, I will provide more detail on our key second quarter operating metrics, beginning with revenues, which declined 1% to EUR 596 million. Organic revenues declined 4.5% as we anniversary peak COVID-related demand during the prior year period. This was offset by the acquisition of Findus Switzerland and favorable currency translation, which combined to benefit revenue growth by 4 percentage points.
On a 2-year compounded basis, second quarter revenue grew 5% and organic revenue grew 4%. Versus the prior year, an expected decline in our branded retail business was offset by growth in our nonbranded business with foodservice growth of over 40% and private label declining modestly. We achieved 50 basis points of gross margin expansion during the quarter or 90 basis points when excluding the dilutive effect of the Findus Switzerland acquisition whose gross margin have a lower starting point. This is a solid outcome in the context of a heightened inflationary backdrop and significantly increased promotional activity versus the prior year period.
Gross margin expansion was driven by a combination of productivity and transactional effects. We are pleased to be in a position to reiterate our gross margin guidance for the year, and as Stefan mentioned, are well equipped to navigate the dynamic inflationary backdrop.
Moving down to the rest of the P&L. Adjusted operating expenses declined 3% year-over-year, reflecting growth in A&P and the decline in indirect costs. Adjusted EBITDA increased 4% to EUR 123 million, and adjusted EPS increased 18% to EUR 0.04 for the quarter. Both metrics beat last year's record performance, and we are positive during the quarter despite an anticipated decline in organic revenues. Further, adjusted EPS also benefited from a 10% reduction in a weighted average share count versus the year-ago period, reflecting the significant level of share repurchase activity conducted over the past 12 months.
Turning to cash flow on Slide 10. We generated EUR 103 million of adjusted free cash flow through the first 6 months of the year, equating to 66% cash conversion. Cash flow and conversion were below the prior period due to the effect of COVID, which was a significant cash flow tailwind in 2020. In the first half of 2021, we rebuilt our inventory position, which was depleted in the year ago period, while undertaking a series of projects to support our long-term growth ambitions. This resulted in EUR 55 million of working capital outflow and an uptick in CapEx. Looking forward, we expect adjusted free cash flow conversion to remain at a similar level in Q3, given the seasonality of the business and improved significantly by year-end.
While 100% productivity will be difficult to achieve in 2021, given our working capital and CapEx need this year, we remain committed to this subject long term. As Stefan mentioned, we refinanced our senior secured notes, a new term loan in Q2, resulting in a lower interest rate, extended maturities and incremental borrowings. This was a very successful transaction with the EUR 750 million note issuance, representing the best pricing among similarly rated European bonds in the past 5 years. Following the acquisition of Fortenova, our pro forma leverage will be in the high 3s and deleverage to the 2s range by the end of 2022.
With that, let's turn to Slide 11 to review our 2021 guidance, which is based on foreign exchange rates as of August 2, 2021. We are reiterating our 2021 full year guidance based on our year-to-date performance and our plans for the second half of the year. As seen on this slide, our guidance continues to call for adjusted EPS of EUR 1.50 to EUR 1.55 per share, representing growth between 11% and 15%. Based on current FX rates, guidance equates to range between USD 1.79 and USD 1.85.
Guidance is based on the continued assumption of organic revenue growth in a range of 1% to 2% and based on contribution from Findus Switzerland and translational effects, total revenue growth in a range of 3% to 5%. This assumes a continued normalization of the category growth and those not take into consideration the possibility of another series of lockdown across Europe as a result of the Delta variant.
We have a very active calendar plan for the back half of the year, which we expect to result in continued market share gains and enabled by an improved capacity situation. As a result, we expect our retail business to grow in the back half despite assumptions that the frozen category will decline modestly versus the prior year. In addition, we expect the contribution from our nonbranded and international businesses, neither of which is tracked within the midterm data available to the investment community.
Finally, a quick word on the pending Fortenova acquisition. We recently completed debt refinancing, which, as Stefan mentioned, reduced our interest rates, extended maturities and provide EUR 400 million of incremental borrowings. The net effect is a marginal increase in our interest expense, which we expect to absorb in our existing guidance. While we will update guidance on Fortenova upon closing, it is important to note that the seasonality of the business is highly concentrated in the summer quarters, mainly Q2 and Q3.
The business is tracking in line with the figures that we provided at the time of signing, and we continue to expect Fortenova to be high single-digit accretive to adjusted EPS in 2022 before taking synergies into account. However, given the seasonality consideration that I just mentioned, we do not expect a material change to our 2021 guidance upon closing of the transaction this fall.
As we own Fortenova at the start of this year, our 2021 adjusted EPS guidance would have been north of USD 2 per share. And as Stefan mentioned, we expect this will set a new baseline for growth in the coming years and contribute to the 2025 target introduced at last year's Investor Day.
Before concluding, I would like to announce that our Board of Directors has approved a new buyback authorization of up to $500 million. Our capital allocation strategy has not changed, and our near-term priority is to close the Fortenova acquisition this fall. Beyond Fortenova, we remain committed to M&A and have an active pipeline that we are working on. With that said, we continue to see value in our shares and this authorization provides us added flexibility to further enhance shareholder value, while maintaining a reasonable leverage profile.
That concludes our remarks. I will now turn the session over to Q&A. Thank you. Operator, back to you.
[Operator Instructions] Our first question will come from Andrew Lazar, Barclays.
I want to start with market share progress, as obviously, this is such a key component to achieving the 1% to 2% full year organic growth target. Organic sales, I think, fell about 1% through the first half. So obviously, no matter we need a pretty significant acceleration in the second half to get there. I was hoping to get your perspective on that and how the share inflection plays into it, especially in -- with a little more depth around Must Win Battles and things of that nature. And then I've got a quick follow-up.
Yes, you're right, Andrew. Obviously, market share from the start, we always said it was a fundamental pillar for our plan for growth in 2021. And yes, we knew from the start that we would be capacity constrained. It's gone. You've already seen the results in May and June in terms of market share, unconstrained obviously, promoting start back, which is great. July is the same thing. So that's on its way.
And to your point, above and beyond, obviously, volume and sales, what is absolutely paramount for us is market share from Must Win Battles. From the start, you may remember back in 2016, we said it's key for us. And what we've seen, which is very, very interesting is that all market share in battles has been positive throughout mostly of COVID, now up of 100 basis points since May. So it's obviously quite significant. And we definitely believe in terms of retail, that the market share in terms of Must Win Battle for us, it's the ultimate indicator of brand health. So we're pleased with that. And it doesn't change anything in terms of what we've said all along over the last 5, 6 years. I think it makes a lot of sense and we're making progress.
Okay. The second question would be, despite the healthy EBITDA upside in 2Q, at least versus sort of consensus, obviously, you kept the full year guidance the same. Would you suggest this is simply out of prudence, given the dynamic operating environment? Or is it that the second half requires maybe a significant step-up in spending for some reason or costs are looking more challenging? Just trying to get a sense of what played into your thoughts around guidance in light of the better second quarter.
Yes. Thanks, Andrew, for the question. I'll take that one. I think the year is playing out as expected, and our full year guidance is unchanged as a result. As you can imagine, and as you highlighted, actually, the environment remains pretty dynamic on multiple fronts. Our adjusted EPS is up 30%, I mean, through the first half of the year, and we are pleased with our performance. At this stage, it is clear that for us, it's prudent to reiterate our guidance, but we will certainly update you along the way.
Our next question. Rob Dickerson, would you like to ask a question?
Yes. Yes. I just -- it didn't come through. I didn't hear that I was called on. Sorry. So I guess, first question is just a follow-up to Andrew's question around the share gains, just a little bit more detail. Stefan, I know in the past, when we've spoken about the business, it sounds like given your exposure throughout the EU and timing differential and certain resets per country, that I was just thinking that as, let's say, you didn't pick up as much share as you could have through COVID because of the capacity constraint. Now it sounds like that capacity constraint has been lifted, you're pointing to already seeing some share gains. It sounds like those share gains aren't contingent on kind of go-forward conversations with retailers and shelf reset timing to get product back on shelf. It's more just infilling that inventory on the space you still have that you never lost. Is that fair?
Well, it's part of that phase. By definition of the retail conversation, it's a bit more implicated than that. But definitely, we're now more in a position to be more promo aggressive in the right way, obviously. A&P, the same thing. So -- and overall, I think our relationship with the trade has improved a lot. So that's combined to your point with no real capacity constraints, that obviously allows us to play a game which is, again, back to what I mentioned to Andrew, is obviously Must Win Battles is paramount, 70% of our business, the highest growth, the highest margin. And so it's a really interesting combination between market share gains and gross margin. Overall, at the end of the day, the consumers have to appreciate. The consumers are going to decide. But what we see is we are confronted by their choices.
Okay. Got it. And then it sounds like kind of what you're implying as well as kind of just looking to see what the price came in, in Q2. And I don't think -- I heard a lot of commentary around go-forward material pricing expectations, that it's fair to assume kind of what's implied in the back half to get you to your full year organic is essentially mostly volume driven. I know it's a simple question, but I just want to clarify.
We will be helped by volumes for sure, but there is effective dynamic, I mean, across -- that we've been managing across the quarter to support our plans and our investments. So I think that we've always wanted to clearly win in the marketplace, I mean by supporting our brands the right way, and to all of the variable related on pricing on investments for sure.
Okay. And then just quickly on Fortenova. I know last year, obviously, it was a pressured year, just given the away-from-home channel. It's a business that has a decent exposure to that channel. If you're expecting to close in Q3, if we're thinking about into next year kind of relative to kind of how you view the longer run rate growth potential of that business, is there a possibility that, that growth could, in fact, be a bit higher in '22, just kind of given the ongoing recovery of away from home relative to long term? That's it. I'll pass it on.
Well, I think, again, it's a very dynamic environment, Rob. So it's difficult to say. The only thing we can say -- we can see at this stage is the business is moving according to plans. To your point, definitely, it's more driven by things like touristic season, so we can expect something obviously interesting in 2022. We haven't seen fully yet what the impact of 2021 yet. We can only assume that 2021 in terms of tourism is going to be better. But definitely, it's not a full season yet.
So definitely, we think we have our plans. There is COVID in the middle. We're going to apply our plans according to our game. There are many levers in that game with Fortenova. And so we're going to apply it. So in the meantime, if there are some COVID-related impact which are positive, even better, but we're not counting on it.
Our next question is from Jason English, Goldman Sachs.
So the first 2 questions has kind of come at the organic sales outlook, at least in some way, shape or form, and I'm not yet ready to move off that because there's obviously been a tremendous amount of investor consternation around your ability to get to that 1% to 2% in light of what we've been seeing in Nielsen data. And now your guidance is implying an acceleration to 3% to 5% to get to that 1% to 2% range, which optically, I'm sure you'll appreciate, looks like a reasonably daunting task.
So can you walk us through, again, the building blocks and maybe put a little more tease or quantification on some of these things? So you mentioned like nonbranded international that are outside of the scope of Nielsen. Remind us how large those are and what you're expecting. You mentioned capacity situation as a dampener that's no longer going to be a dampener. How much does that dampen your growth? And what are the other puts and takes that we should be contemplating have confidence in your ability to get to that 3% to 5% in the back half?
Okay. Let me start -- Jason, let me start with the first part of the answer, which is the situation as of today, and Samy will go on with the second part which is looking forward. So the first thing, as usual, and you know this, Nielsen is only part of the story for us. It's probably something like at best, 60%. So all Nielsen data include Green Cuisine, which is obviously several percentage better than the Wall Street data. Foodservice, it's been a 1% drag of the past 15 months. Now it's a 1% tailwind. International is not in Nielsen. It will be a tailwind starting definitely in Q3. Nordics has been a drag in the past, was a tailwind in Q2, starting to get there. So that's the big difference between obviously what Nielsen says for the first 2 quarters and obviously our final results.
With that, I will give the word to Samy for the second part, which is obviously the latest estimate for the year.
Yes. I think as you -- Jason, I think as you combine all of the fact that Stefan has said, which is clearly building on the momentum that we have on Must Win Battle with the share gains that you have seen, I mean, recently, clearly, the step-up in foodservice and the first one would include actually Green Cuisine in there. The fact that the effective foodservice is stepping up as we go. And the element effective in internationals that are not included in the numbers, clearly, that gets us to reiterating, if you want, the confidence of the 1% to 2% guidance there. Clearly, our assumption for category growth are for modest decline versus 2020, but we expect our branded retail will grow year-on-year. And the other piece is you need to keep in mind that our half 2 comes slightly easier than in half 1 overall.
Our next question is from Robert Moskow, Credit Suisse.
Bad news is it's going to be the same question as the last 4, so -- but maybe a little different. You said the back half depends on market share gains, but a lot of your peers give us a lot of data on how their market share is trending. And I don't think I've ever seen share data from Nomad on a weighted average basis or percentage of portfolio. Is there any way you could give us a sense of like, did you gain a lot of share in 2020? Did you gain a lot of share in 2019? Do you have that data internally? And how do you think your share has trended over time? And then a follow-up.
Well, I think overall, our market share was up consistently in the past. And again, not only in terms of sales, but even more importantly, in terms of -- I think you would appreciate that in terms of margin, which is absolutely fundamental. So it's really a combination, and margin will mean also Must Win Battle. So Must Win Battle, the market share is up even more. And as a result, our market share in terms of margins -- gross margin, gross profit is even bigger. So that's that.
In terms of 2020, as we said, market share was modestly, I would say, mainly driven by capacity constraints. Same thing for Q1. We said that, we mentioned that the market share was down. You remember that our service level went down to the low 90s. So unsurprisingly with that, and obviously, with a lower promotion intensity, you only can go down, and we knew this Q2, it would happen. Q2 was flat. But with May and June up, and July is still incomplete, but what we look at what we can see at this stage is we are up. So that's where we stand. And I think it's something that we already communicated, but fine, we will make it even more straightforward.
Right. I'd appreciate it. Another follow-up. Inflation, we've heard quantification from other companies as to how much inflation they're getting. It seems to be high single digit, maybe even 10%. I haven't heard from you. But can you give us a sense of where you are right now? Is it mid-single? Is it higher than that? Is it offset by currency?
We clearly, I mean, are seeing inflation similar to other packaged goods companies. But the reality is that our portfolio and our business structure is actually putting us in a stronger position in order to navigate, let's say, through inflation, and our mix is clearly playing us -- helping us, for instance, let's say, the fact that we have a high share of our portfolio in fish and vegetable is definitely here because we see more modest inflation there. FX is a tailwind, as you know. And clearly, I mean, market inflation is not necessarily a great indicator for us given that we buy with scale. And for example, I mean, we are the #1 buyer, I mean, of white fish in the world. So we are able, I mean, to leverage clearly our scale from that perspective.
So inflation, there is. But if you want definitely more manageable given all of the factors that we have, and we have a lot as well of ways to clearly navigate in a very efficient way through productivity, scale, as I had mentioned. Mix is a help as well, not mentioning the effects, which I have already called for. And indeed, I mean, pricing and net revenue management, which we continue to deploy year after year.
[Operator Instructions] Our next question will come from Faiza Alwy, Deutsche Bank.
So I also wanted to first just follow up on the top line again. I guess, are you able to talk about how much you expect this category to decline as we go into the back half in your core markets?
I'll take on that one. Actually, the category is expected to decline low single digits as we have already mentioned. And our assumption actually is for modest growth in our branded business, for sure. And that's where we are overall.
Okay. And can you talk a little bit more about sort of any quarterly variation as we go through the back half? Because I know that the comp is tougher in 4Q, but I wonder if some of the initiatives that you have, whether it's international or some of the other sort of product initiatives that you might have are more catered towards the fourth quarter. So just any further color on the 2 quarters in the back half.
Sorry, I mean there was just a point on the line, sorry for that. So I mean, we're going to get to the detail. I mean through Taposh would walk -- will really walk you through the modeling. I mean the Q3 sales comp, I mean, are easier. And then Q4, we invested significantly in SG&A. So that present an easier comp as well. So I mean, as it relates to the specific modeling that you're requesting, Taposh will take you through that.
Got it. Okay. And then just on the gross margin, as we think about the back half, I wonder if you could talk about your conservatism around gross margin, how much of it might be related to just some of the cost inflation that you highlighted versus maybe incremental promotions that you might be doing to boost the top line?
Yes. Our full year gross margin expectation are unchanged, Faiza. I think, I mean, our raw material are locked for the year. And we have a really good cover, as you have already seen, and we continue to see. For us, promotions are an important part of the business model. And of course, I mean, this is how we contribute to, let's say, stepping up our growth for sure. Retailer and consumer value promotion, which is a category where promotions are needed if you want to grow the top line and gain share overall. So I said the overall, I mean, to close on to your question, I think, I mean, the reality is just our full year gross margin are clearly unchanged, expectation, they are unchanged, I mean, for the year.
Our next question is from Jon Tanwanteng from CJS Securities.
My first one, I know you're not providing specific guidance around the Delta variant. But I was wondering, since the U.K. is your biggest market, can you just talk about the trends in July and how that's played out between the rise and fall of the COVID cases and other things like labor shortages resulting in empty shelves and empty freezers? Is that a net tailwind for you with more consumption and maybe more retailers desperate for stock? Or is it a headwind? Maybe you can't get stock...
Yes. When it's -- what happened in the U.K. is interesting one, but it's -- I think it can be an improvement, will be, to your point. But overall, what's important when you think the big picture for Nomad is, July is improving our market share. It remains a small month. So if there is a bit of tailwind after the result of what happened with the retailers in the U.K., even better. And that's that. So with Fortenova, obviously, as we're going to close probably end of Q3, so we're preparing ourselves. So that's obviously also an interesting one in terms of ice cream, an interesting complement to us. So that's that stage, but with the game. Delta is, we haven't come to any change with Delta thing. So I think at this stage, we're not expecting any additional lockdown.
Okay. Great. And then on just -- it's good to see the share repurchase authorization. But just given your leverage in the high 3s in the near term, how should we think of your willingness to allocate capital there versus paying down debt and maybe what level of net debt leverage makes it more comfortable to actually repurchase shares?
Our position is unchanged. I think our old authorization was exhausted. And the Board has agreed and decided, I mean, to have the program to EUR 500 million. We clearly continue to, let's say, focus on trying to enhance shareholder value overall. Our near-term focus is on Fortenova and M&A. And now we've added another level of flexibility with this authorization.
At present, we have no further questions. [Operator Instructions]
Okay. So if there are no further questions, why don't we go back to Stefan for his closing remarks.
Okay. Let me go to the final remark to your point, Taposh. So again, thank you for your participation today. Second quarter results demonstrate the power and the resilience of our value creation model. We received record adjusted EPS performance despite the anniversary of peak COVID demand a year ago. And as you can see, we're navigating a number of dynamic macro factor this year, return to out-of-home consumption inflation. But meanwhile, we continue to deleverage our scale and balance sheet to build on the strong foundation of our brands, and we are welcome with the new acquisitions in our portfolio. In summary, we remain on pace to achieve our guidance for 2021 and are on pace to achieve our long-term financial targets. Thank you, and have a great day.