Matthew Smith

Matthew Smith asked for clarification on Monster Beverage's margin performance, specifically how gross margins expanded despite tariff and inflation pressures, and sought more detail on General & Administrative (G&A) expenses, including whether investment areas are ongoing or one-time.

Answer

Hilton Schlosberg, Vice Chairman and CEO, explained that gross profit margin increases were primarily due to pricing actions, supply chain optimization, and product sales mix (more zero sugar SKUs), partially offset by aluminum can costs (LME, Midwest Premium) and geographical sales mix. He noted that the impact of tariffs and aluminum price increases was modest and largely offset by selling price increases. Schlosberg anticipates modest cost increases in Q1 and Q2 2026 due to aluminum, then lapping high 2025 prices. Regarding G&A, he detailed specific items: a $9 million increase in performance-based incentive compensation, professional services for the new AFF San Fernando facility, and $6.6 million for digital transformation initiatives, clarifying that G&A as a percentage of sales is actually decreasing when adjusted for these items.

Matthew Smith of Stifel inquired about the drivers behind Monster Beverage's gross margin expansion across regions despite cost pressures from tariffs and inflation, and sought more detail on G&A expenses, specifically whether recent investment areas are ongoing or one-time in nature.

Answer

Hilton Schlosberg, Vice Chairman and CEO, attributed gross profit margin increases primarily to pricing actions, supply chain optimization, and product sales mix (more zero sugar SKUs), partially offset by aluminum can costs (LME, Midwest Premium) and geographical sales mix. He stated the impact of tariffs and aluminum price increases was modest and largely offset by pricing, with an active hedging program in place. Regarding G&A, he clarified that while there were increases from performance-based incentive compensation, professional services for the new AFF San Fernando facility, and digital transformation initiatives, adjusting for these items shows G&A as a percentage of sales actually decreasing, with some digital transformation costs being capitalized.

Matthew Smith asked about the expected level of pricing and price realization from Monster Beverage's strategic price increases and promotional reductions effective November 1st, 2025, and if it would differ significantly by channel.

Answer

Hilton Schlosberg, CEO, stated that revised pricing was implemented, anticipating minimal volume impact. Rob Gehring, CGO, explained that the company's revenue growth management (RGM) strategy balances rate, trade spend, package mix, and channel mix, with results to be seen in scanner data in coming weeks.

Matthew Smith asked about the expected level of pricing from the strategic price increases and promotional reductions effective November 1st in the U.S., and whether price realization would differ significantly by channel.

Answer

Hilton Schlosberg (CEO) stated that revised pricing was implemented November 1st with anticipated minimal volume impact. Rob Gehring (CGO) added that the company's revenue growth management strategy balances rate, trade spend, package, and channel mix to grow the top line faster than units, with specific results to be seen in scanner data soon.

Matthew Smith inquired about the components of Vital Farms' EBITDA guidance, specifically the gross margin versus P&L investment, and whether price mix would be positive with carry-in pricing funding promotional normalization. He also sought clarity on Q1 expectations, particularly if shipments would align with consumption given recent noise.

Answer

Thilo Wrede, CFO, clarified that the May price increase is being reinvested into promotions, which represent a return to a normal cadence rather than defensive action, impacting gross margin. He noted expected operating expense leverage and positive, though reduced, price mix benefits from the shift to organic products. Mr. Wrede stated that shipments generally align with consumption, accounting for timing and channel differences.

Matthew Smith asked about the EBITDA guidance range, specifically the breakdown between gross margin and middle-of-the-P&L investment. He also sought clarification on whether price mix would be positive for the year, with carry-in pricing funding promotional normalization, and if Q1 shipments were expected to align with consumption given recent noise.

Answer

Thilo Wrede, CFO, explained that the May price increase is being reinvested into promotions, which represent a return to a normal cadence, not a defensive move. This strategic promotional activity impacts gross margin, but operating expense leverage is still expected. He noted that while price mix benefits from the shift to Organic, it won't be as significant as in prior years. Regarding Q1, Thilo Wrede stated that shipments generally align with consumption, accounting for usual timing and channel differences.

Matthew Smith inquired about the retail demand environment, asking if future growth will come from adding more items to existing shelves or from entering new retailers. He also asked for a follow-up on the expected price/mix drivers for the remainder of the year.

Answer

CEO Russell Diez-Canseco responded that the primary opportunity lies in expanding the product portfolio and shelf space within their existing 23,000+ high-performing stores. CFO Thilo Wrede detailed the second-half mix drivers, including the ongoing shift to organic products and the full-quarter impact of pricing, which will be partially offset by increased promotions.

Matthew Smith asked if the price increase was contemplated in the initial 2025 guidance and questioned the visibility into egg availability from new farms. He also requested details on where the company is seeing cost pressures from tariffs, particularly for the egg business.

Answer

President and CEO Russell Diez-Canseco stated the price increase was not in the initial guidance but was a prudent measure to offset anticipated tariff impacts. CFO Thilo Wrede confirmed that farm onboarding is on track with the expected nine-month timeline, providing good visibility. He detailed tariff exposures including imported butter from Ireland, packaging from Canada, and European barn equipment for both accelerator and family farms.

Matthew Smith questioned how the newly announced pricing affects the full-year guidance and asked about visibility into egg availability and farm onboarding timelines. He also followed up on tariff exposure, seeking specifics on cost pressures for the egg business.

Answer

CEO Russell Diez-Canseco confirmed the price increase was not in the initial guidance but was added to address tariff impacts. CFO Thilo Wrede affirmed that farm onboarding is on schedule, providing clear visibility for the year. Wrede detailed that tariff pressures come from imported butter, packaging from Canada, and European farm equipment, but the price hike is more than sufficient to cover these impacts.

Matthew Smith followed up on the retail pricing environment and asked if avian influenza was causing any disruptions to the timeline or cost of bringing new farms online.

Answer

President and CEO Russell Diez-Canseco clarified his comments were to explain data discrepancies and not to analyze retailer pricing strategies. He then confirmed that Vital Farms is not seeing any material impact from avian influenza on its pullet supply or the timeline for onboarding new farms, attributing this partly to luck.

Matthew Smith of Stifel asked for the specific drivers behind the reacceleration of price/mix in the egg business during Q3. He also inquired about the health of the new family farm backlog, particularly concerning the new facility planned for Indiana.

Answer

CFO Thilo Wrede explained that the Q3 price/mix benefit was driven by a favorable sales mix, including a higher proportion of organic eggs and stronger retail sales versus other channels, rather than price increases. Chief Sales Officer Pete Pappas added that new item placements are often higher-priced SKUs. On the farm backlog, CEO Russell Diez-Canseco stated that farmer recruitment is a long-term, intentional process and that while they are building awareness in Indiana, they are not yet aggressively adding farms there, preferring to wait until the new facility's opening is closer.

Matthew Smith inquired about Altria's fiscal 2026 outlook, specifically the scope and nature of benefits from import/export activity, including the percentage of packs with Federal Excise Tax (FET) benefits and whether second-half benefits are more cost-normalizing or volume-driven. He also asked if the elevated 2026 CapEx guide for import/export investments is a one-time increase or indicative of multi-year higher CapEx levels.

Answer

CEO Billy Gifford explained that the import/export benefits are a mix of cost normalization and volume, with upfront investments moderating throughout the year. He noted these investments position Altria's Richmond manufacturing center for international production and help avoid competitive disadvantages related to duty drawback. CFO Sal Mancuso confirmed the CapEx increase is primarily for import/export, providing long-term capabilities, and that these investments generally precede volume. Billy Gifford added that despite the increase, CapEx remains relatively low for a company of Altria's size.

Matthew Smith inquired about Altria's 2026 outlook, specifically the scope and benefits of the import/export activity building in the second half, and whether the elevated 2026 CapEx guide for $300 million-$375 million is a one-time increase or a multi-year trend.

Answer

CEO Billy Gifford stated that while specifics are limited, upfront investments for import/export capabilities will moderate, providing duty drawback opportunities and setting up manufacturing for international markets. CFO Sal Mancuso confirmed the CapEx increase is primarily for import/export investments, which precede volume, and also includes investments in the smoke-free portfolio like on! PLUS. Billy Gifford added that it remains a relatively low level of capital expenditures for a company of Altria's size.

Matthew Smith inquired about the drivers behind the raised 2025 guidance, specifically asking for expectations on underlying OCI growth in the second half and the potential impact of a more uncertain consumer environment. He also sought an update on the development and potential FDA submission timeline for the redesigned nJoy ACE e-vapor device.

Answer

CFO Sal Mancuso acknowledged the strong first half but noted that EPS growth would moderate due to lapping the ASR program and MSA benefits, emphasizing the need to monitor the dynamic macroeconomic environment. CEO Billy Gifford confirmed the redesigned nJoy product is at "product lock" and that Altria is exploring all next steps, including litigation appeals, but did not provide a specific re-launch date.

Matthew Smith asked about the current state of the consumer, whether inflationary pressures are driving cross-category movement to e-vapor, and what gives Altria confidence in its robust cigarette pricing strategy.

Answer

CEO William Gifford confirmed that the cumulative impact of inflation is pressuring consumers and making price a more prominent factor in the shift to illicit e-vapor. He added that Altria's confidence in its pricing strategy stems from the flexibility provided by its data analytics and revenue growth management (RGM) tools, which allow for targeted support at the store level.

Matthew Smith of Stifel asked about the expected phasing of 2025 earnings growth and the key trends impacting adult tobacco consumers, including discretionary income pressure and the shift to discount brands.

Answer

CEO William Gifford explained that Altria does not provide quarterly guidance but noted no major distortions are expected in 2025, aside from one less shipping day in Q1. Gifford also stated that the cumulative impact of inflation continues to pressure consumers, leading to some down-trading, and highlighted the significant cross-category pressure from the illicit e-vapor market.

Matthew Smith inquired about the factors influencing the wide range of Altria's Q4 guidance and asked for insights into the consumer dynamics driving the reacceleration of the discount cigarette category's market share.

Answer

CFO Salvatore Mancuso confirmed that the Q4 guidance includes the benefit from the MSA legal fund expiration and an extra shipping day. CEO William Gifford attributed the growth in the discount segment to the economic strain on consumers and the impact of illicit e-vapor products drawing consumers from the cigarette category.

Matthew Smith inquired about the moderating Price/Mix drag in North America for the second half, asking if current year contract pricing aligns with prior year performance and if the initial guidance of a low single-digit headwind still holds given the mix impact. He also asked about the expected duration of the mixed headwind.

Answer

CFO Bernadette Madarieta confirmed that Price/Mix was expected to be down more in the first half than the second, and that trend continues. She emphasized that the mix impact, driven by growth in chain business and a shift from branded to private label, has been more pronounced. She expects the mixed headwind to persist through the balance of the current fiscal year, with chain customer impacts continuing longer.

Matthew Smith from Stifel asked for a bridge from the strong Q3 North America volume to the weaker Q4 outlook, and for an update on the medium-term 19-20% EBITDA margin target.

Answer

Executive Bernadette Madarieta clarified that Q3 saw a more pronounced benefit from lapping the prior year's ERP disruption, while Q4's results are more impacted by known customer losses. CEO Mike Smith deferred commentary on future margin targets, stating that updated guidance will be provided in the next earnings call.

Matthew Smith asked for more detail on initiatives to improve manufacturing utilization, whether temporary line suspensions contributed to inefficiencies, and if utilization improvements are driven by traffic or internal efficiency.

Answer

President and CEO Thomas Werner clarified that the temporary suspensions were in line with expectations and did not cause the recent production challenges. The inefficiencies stemmed from unplanned downtime and start-up issues, which are now improving. He confirmed that expected utilization improvements are a reflection of internal efficiency gains and running lines more normally, not a change in traffic trends.

Matthew Smith sought to reconcile the seemingly contradictory statements that pricing investments are in line with expectations, yet are also a factor in guiding to the low end of the EBITDA range.

Answer

CFO Bernadette Madarieta clarified that while the full-year pricing investment plan is on track, the timing of these investments is more heavily weighted to the upcoming quarters. The positive price/mix in Q1 will shift to negative price/mix as planned. She emphasized that the primary driver for targeting the low end of the EBITDA range is higher manufacturing costs, not unexpected pricing pressures.

Matthew Smith inquired about any common threads among the 10% of price adjustments that are lagging expectations, specifically regarding Totino's, and asked about the channels taking share from traditional channels in pet and the drivers of consumer behavior.

Answer

Dana McNabb, Group President of North America Retail and North America Pet, clarified that there's no common thread, primarily Totino's due to a price pack architecture conversion, and expressed confidence in future performance. She identified e-commerce as the channel gaining share in pet, noting that pet purchases over-index in this channel.

Matthew Smith asked about the quarter's margin performance, which exceeded expectations, requesting details on gross margin composition, the international timing benefit, and the phasing of inflation investment throughout the year. He also followed up on the trade expense phasing in North America Retail.

Answer

CFO Kofi Bruce attributed better-than-expected profit to lighter inflation phasing (closer to 2%) and a $20 million international trade expense timing benefit, both expected to unwind in Q2, leading to a larger operating profit decline in Q2. He noted Q2 inflation would be higher, with inventory absorption headwinds and no yogurt contributions. He confirmed trade expense was a drag in Q1 and Q2 due to prior year comps, normalizing in Q3 and becoming a tailwind in Q4.

Matthew Smith from Stifel Institutional sought an update on Hain Celestial's strategic review, asking about areas where the company is increasingly confident in value-accretive potential, citing recent decisions like exiting EVES and focusing on revenue growth management. He also inquired whether the expected second-half improvement relies on changes in category trends or solely on Hain's internal initiatives, and requested quantification of the sales drag from SKU rationalization and business exits.

Answer

Alison Lewis, Interim President, CEO & Director, indicated ongoing progress on the strategic review, with updates to be provided when definitive. She emphasized decisive actions like exiting the structurally disadvantaged EVES business and continuous SKU reduction through a new 'portfolio management review' process. Lee Boyce, CFO, clarified that the second-half improvement is driven by a combination of factors: portfolio streamlining, brand renovation and innovation, continued productivity, and strategic revenue growth management including pricing. He noted that SKU rationalization targets a 'long tail' for margin improvement but did not quantify the sales drag.

Matthew Smith asked if the expected second-half organic growth in the U.S. will be broad-based and which categories carry more confidence or risk. He also inquired if learnings from stabilizing the Personal Care business could be applied to other parts of the portfolio.

Answer

CEO Wendy Davidson and CFO Lee Boyce confirmed they expect broad-based drivers for second-half growth, including the full recovery of infant formula, the promotional shift in snacks, and recovery in beverages. Regarding Personal Care, Davidson explained this is part of the 'focus' pillar of the Hain Reimagined strategy, where businesses are stabilized before determining their long-term fit. Boyce noted that about 10% of the portfolio remains in this 'stabilize' phase.

Matthew Smith from Stifel asked for clarity on the fiscal 2025 organic sales outlook. He questioned whether the 'flat' guidance includes a headwind from ongoing SKU rationalization or if that impact is excluded from organic results, and if divestitures explain the implied reported sales decline.

Answer

CEO Wendy Davidson clarified that while complete category exits are excluded from organic sales, regular portfolio maintenance and SKU trimming are included and do represent a headwind in the first half of the year. CFO Lee Boyce noted that an adjusted 2024 baseline was provided to clarify the starting point post-divestitures. The executives committed to providing a precise reconciliation later.

Matthew Smith inquired about the Foodservice segment's pricing performance, seeking to understand how much of the increase was due to Avian Influenza (AI) cost recovery versus underlying price adjustments. He also asked for clarification on the increased CapEx guidance.

Answer

CFO Matt Mainer explained that the Foodservice pricing included recovery of costs from Q2 as well as ongoing pricing to offset currently elevated egg markets. COO Jeff Zadoks added that normal year-over-year contract renegotiation pricing also contributed. Regarding capital expenditures, Mainer clarified that the guidance increase was due to a faster pace of spending on key projects, not an increase in overall project costs.

Matthew Smith inquired how Post's supply disruption from avian influenza compares to the broader industry and whether the company is realizing a pricing benefit on its unaffected supply.

Answer

COO Jeff Zadoks estimated that Post's supply disruption is on par with the industry at approximately 12-14%. He confirmed that the company continues to benefit from pricing adders related to the May 2024 outbreak and expects these to be extended, with new adders likely in the future, which will support revenue.

Matthew Smith requested details on the primary growth levers for the Foodservice segment's EBITDA in fiscal 2025, given the tough year-over-year comparison. He also asked for an update on the progress and operational status of the aseptic shake manufacturing facility.

Answer

President and CEO Rob Vitale identified increased foot traffic in QSRs and a mix shift toward higher value-added products as the key growth drivers for Foodservice. On the aseptic shake facility, Vitale stated there is significant room for improvement, as output is below expectations. He now anticipates reaching the target run rate in the second half of fiscal 2025, a one-year delay caused by equipment, parts, and labor challenges.

Matthew Smith of Stifel Institutional asked for expectations on the upcoming fall shelf resets, how to define market share success amid new competition, and whether the view on necessary A&P spending has changed.

Answer

CEO Darcy Horn Davenport expressed confidence in the fall resets, anticipating continued expansion of Total Distribution Points (TDPs). She stated that growth is not dependent on gaining market share and that holding share in a growing category is a success. CFO Paul Rode added that they expect marketing spend as a percentage of sales to increase gradually over time, which should be offset by G&A leverage.

Matthew Smith asked about the increased marketing and advertising spend, questioning if Q2 represented a peak level and how the full-year spending outlook has changed.

Answer

CFO Paul Rode clarified that Q2 spend was in line with expectations due to the Premier Protein national campaign. For the full year, he noted a slight reallocation from marketing to promotional spend, adjusting the full-year A&P forecast down slightly to a mid-3s to high-3s percentage of sales.

Matthew Smith from Stifel asked for the reason behind shifting marketing spend from Q1 to the second half of the year and inquired about the expansion plan and incremental nature of the new 'Indulgence' product line.

Answer

President and CEO Darcy Davenport and CFO Paul Rode explained the marketing shift was a minor timing adjustment of a few weeks to finalize creative, pushing the campaign start from mid-December to late December. This shifted about $4 million in spend to the second half, but the total planned spend for the year remains unchanged. Regarding the 'Indulgence' line, Davenport confirmed it launched in Q1 with one mass customer and e-commerce, will expand to other accounts throughout the year, and its shelf space is incremental to the core Premier Protein lineup.

Matthew Smith asked if the fourth-quarter marketing spend of 4.5% of sales should be considered a benchmark for the full fiscal year 2025.

Answer

CFO Paul Rode advised that full-year fiscal 2025 marketing spend is expected to be slightly less than 4.5%, likely in the high 3s to low-to-mid 4s range. He also noted that the impact on margins will be more significant in the first half of the year compared to the second half, due to lapping lower spend from the prior year.

Matthew Smith from Bank of America Merrill Lynch questioned if the new, lower full-year CapEx guidance of $350 million is sustainable into 2026, given potential FIDs for Tiberias and GTA Phase one plus, and also asked about partnership alignment on the GTA expansion.

Answer

Chairman & CEO Andrew Inglis affirmed that the ~$350 million CapEx level is sustainable for 2026 and sufficient to fund growth, primarily through four committed wells at Jubilee. He clarified that major spending on Tiberias and the GTA expansion would likely occur in the 2027-2028 timeframe. Regarding GTA, Inglis confirmed the partnership is aligned on a brownfield expansion, with ongoing work to optimize well count and the mix of LNG versus domestic gas offtake.

Matthew Smith questioned whether Kosmos would be comfortable deploying growth capital for the Tortue Phase 1+ expansion in the current price environment and if the company is considering monetizing its stake in Senegal and Mauritania.

Answer

CEO Andrew Inglis responded that growth CapEx for Phase 1+ is not yet committed, giving the company flexibility on the timing of the investment. Regarding monetization, he stated that the priority is to first demonstrate the full value of the GTA asset as it ramps up production before considering any potential sale or dilution, noting that initial subsurface data has been very positive.

Matthew Smith from Bank of America questioned if there was a change in impetus from the operator regarding further GTA development phases and how potential Tortue CapEx might affect the stated $400 million CapEx ceiling beyond 2025. He also asked for clarification on Jubilee's production run-rate in early 2025.

Answer

Chairman and CEO Andrew Inglis confirmed there is strong alignment with partners on moving forward with GTA expansion, bolstered by positive initial well data. He emphasized that future development will be capital-efficient and fit within the company's disciplined capital framework, stating there would be no 'massive capital spend.' He also confirmed that Jubilee's production in early 2025 is within the forecasted range, accounting for planned maintenance.

Matthew Smith asked for details on the Tortue FLNG commissioning process, the timeline to first production, and the commercial arrangements with BP, including whether Kosmos could sell cargoes on the spot market during commissioning.

Answer

CEO Andrew Inglis explained that the commissioning process is being accelerated and revenue recognition will begin shortly after first gas is introduced, a much shorter period than the six-month contractual finalization with Golar. He and CFO Neal Shah confirmed that BP will lift all cargoes under the long-term framework, not Kosmos on the spot market, with a minor pricing difference during the initial six-month period.

Matthew Smith from Stifel questioned the drivers behind the full-year volume outlook, noting the year-to-date decline and asking what is embedded for the second half. He also asked if the company is seeking broader opportunities for margin management given its recent success.

Answer

CFO Patrick O'Donnell stated that underlying consumer trends are expected to be similar, with tailwinds from the griddle and broth recoveries. CEO Steven Oakland added that 2025 is a 'reset year' for margin management and cost structure, with the majority of these actions expected to be completed by year-end, positioning the company for a return to growth in 2026.

Matthew Smith inquired about the specifics of the 2025 margin management actions, including the expected volume impact, the phasing of these actions throughout the year, and whether this represents a one-time reset or a new ongoing strategy.

Answer

Chairman, CEO and President Steven Oakland explained the strategy is to align operations with the most profitable volume, which may create a 1-2 point volume drag but improve margins by reducing the cost-to-serve. EVP and CFO Patrick O'Donnell added that the impact will begin in Q2 and build through the year as the company becomes more selective on bids and complex business.

Matthew Smith from Stifel asked about the company's confidence and visibility regarding the planned Q1 restart of the frozen griddle production facility following the recall.

Answer

CEO Steve Oakland expressed strong confidence in the Q1 2025 restart, emphasizing that the issue was identified through the company's own enhanced food safety protocols and diligence. He stated that TreeHouse has the necessary resources dedicated to resolving the issue and believes the learnings will strengthen the overall business.

Matthew Smith from Bank of America asked about the drivers of the strong performance in GGP gas trading during the quarter and the outlook for the business for the rest of the year, given the current market volatility.

Answer

Cristian Signoretto, Director of Global Gas & LNG Portfolio, attributed the strong quarterly performance to two factors: a one-off contract settlement and continued, albeit lower, market volatility. He noted that volatility between JKM, TTF, and oil prices created profitable global arbitrage opportunities, which drove the result.

Matthew Smith of Bank of America asked for specifics on which projects were being postponed as part of the CapEx cuts and whether they could be canceled in a prolonged weak price environment. He also sought a comparison between Eni's first and second discoveries in Namibia.

Answer

Executive Francesco Gattei clarified that the CapEx optimizations are spread across smaller activities like exploration and service station rebranding, with no major projects being delayed. Regarding Namibia, Executive Guido Brusco stated that it is premature to compare the two discoveries as the new find requires further assessment to understand its full potential.

Matthew Smith questioned the gross CapEx guidance, which appears higher than the current run-rate, and asked if the potential €500 million buyback increase is contingent on the macro environment.

Answer

Executive Claudio Descalzi stated that while H1 spending was low, the full-year gross CapEx is still expected to be close to the €9 billion guidance due to planned activities in H2. CFO Francesco Gattei clarified that the decision on the additional buyback is primarily driven by visibility on the disposal plan, noting that the impact of the current oil price on full-year CFFO would be minor and not a major factor in the decision.

Matthew Smith from Bank of America questioned Eni's confidence in delivering its targeted disposal proceeds within 2024 to meet its net CapEx guidance. He also sought Eni's perspective on the fundamentals of the European gas market and the evolution of demand, given surprisingly resilient prices.

Answer

Executive Francesco Gattei expressed high confidence in the disposal plan, stating that several deals are in advanced stages but emphasized that the company will prioritize value over speed. Cristian Signoretto, Head of GGP, added that the global gas market remains 'finely balanced,' with demand pickup in Asia, some industrial recovery in Europe, and various supply uncertainties contributing to expected volatility over the next 12-18 months.

Matthew Smith from Stifel asked if the raised guidance was primarily due to the Q2 beat and a better tax rate, with the H2 outlook remaining stable. He also questioned how heated tobacco unit (HTU) pricing is affecting volume and user acquisition.

Answer

CFO Emmanuel Babeau explained that while H2 smoke-free momentum remains strong, the overall H2 outlook is tempered by a less favorable combustible volume trend and the absence of H1 benefits like ZYN restocking and favorable device comps. On pricing, he emphasized the strategy is to increase prices only where it does not meaningfully penalize the volume growth trajectory of HTUs.

Matthew Smith questioned the full-year guidance, noting that strong H1 constant currency EPS growth implies a weaker H2, and asked for clarification on the shape of the year. He also asked about the underlying drivers for the expected reacceleration in IQOS IMS growth for the remainder of 2025.

Answer

Chief Financial Officer Emmanuel Babeau clarified that the difference between H1 and H2 performance is due to traditional phasing of shipments and investments, not a change in underlying business momentum. He noted that while IQOS IMS growth is expected to accelerate, shipment phasing may differ. Regarding the IQOS IMS reacceleration, Babeau explained that the impact of the EU flavor ban will lessen in H2 as it is annualized, which will drive an acceleration in Europe, complemented by continued strong performance in Japan and other growth markets.

Matthew Smith asked about the composition of the 2025 growth outlook for Heated Tobacco Units (HTUs), questioning if the geographic contribution is shifting and if new markets are expected to contribute to growth in 2025 or 2026.

Answer

Jacek Olczak, Chief Executive Officer, responded that the 2025 guidance is based on continued organic growth in existing key markets like Japan and Europe. He noted that while some European markets (Italy, Czech Republic) are recovering more slowly from flavor bans, the overall momentum is strong. The outlook does not assume significant volume contributions from new market openings due to ongoing regulatory challenges.

Matthew Smith asked about the expected distribution headwind for the Atkins brand from upcoming shelf resets and whether the growth from Quest and Owen could offset this decline to meet the company's long-term growth targets in fiscal 2026.

Answer

CEO Geoff Tanner confirmed that Atkins will see continued double-digit declines in fiscal 2026 due to strategic distribution cuts aimed at creating a more sustainable business focused on core SKUs. He noted the underlying brand is flat when excluding these cuts. CFO Chris Beeler added that while it's early for FY26 guidance, they expect strong Quest and Owen trends to continue, but the Atkins decline will be a headwind to total company growth.

Matthew Smith followed up on the contribution margin gap between Atkins and Quest, asking if it's expected to narrow. He also inquired about the strategy for building OWYN's low household penetration and awareness, questioning whether the focus would be on distribution or marketing investment.

Answer

CFO Shaun Mara stated that he does not expect the contribution margin gap between Atkins and Quest to narrow drastically in the near term due to ongoing investment and inflation pressures on the Atkins brand. CEO Geoff Tanner explained that the strategy for OWYN will follow the Quest playbook: prioritize building a broad distribution footprint first to maximize the ROI of future national marketing campaigns. For the next couple of years, the focus will be on distribution and innovation.

Matthew Smith of Stifel Financial Corp. asked if strong category growth has altered fiscal 2025 expectations and requested clarification on a Q1 shipment timing impact, including its brand allocation and potential reversal in Q2.

Answer

CEO Geoff Tanner stated that expectations for category growth remain consistent, driven by the mainstreaming of nutritional snacking. CFO Shaun Mara clarified that Quest accounted for about two-thirds of the shipment timing headwind and expects shipments and consumption to align more closely by the end of Q2 and for the full fiscal year.

Matthew Smith asked for clarity on the underlying growth outlook for the legacy business in fiscal 2025, requesting details on the quarterly phasing for Quest and Atkins given capacity improvements and trade spend optimization.

Answer

CFO Shaun Mara provided a detailed quarterly outlook, projecting low-double-digit to low-mid-teens reported net sales growth for Q1-Q3, with a flattish Q4 due to the 53rd-week comparison. He also noted gross margin would be nearly flat in Q1 before declining. CEO Geoff Tanner added that Quest chips sales are expected to recover and add 2-3 points to Quest's growth, while Mara clarified that Atkins' POS would likely soften from January onward as investment cuts take effect.

Matthew Smith of Stifel asked about the visibility and confidence in customer orders supporting the projected back-half EBITDA growth from the Conway facility. He also inquired about future capacity expansion plans beyond the current lines and sought clarification on what is included in the Conway CapEx figures.

Answer

CEO Scott Ford expressed high confidence, noting that customer demand is as strong as forecasted, with clients actively seeking available production slots. He explained that the Conway facility was built for efficient expansion. CFO Chris Pledger added that the RTD facility also has room to grow and that a third can line is already on site. Pledger clarified that CapEx for the separate single-serve facility in the Conway distribution complex is tracked separately from the main RTD plant.

Matthew Smith asked about the impact of higher coffee prices on customer order cadence and new product launches, and for clarification on whether the 2026 guidance implies a full run-rate for new capacity by the end of 2025.

Answer

Chief Financial Officer Chris Pledger explained that the impact from higher coffee prices is expected to flow through to consumers in the second half of the year, which could affect demand, and this risk is factored into the 2025 guidance. He confirmed that the 2026 guidance assumes all new capacity is fully scaled by the end of 2025, with no further scale-up costs expected in 2026.

Matthew Smith sought to reconcile the statement that Conway would more than double the base business EBITDA with the $150M-$180M total earnings power figure, asking about the timing. He also asked for an update on the expected EBITDA exit run rate for 2025.

Answer

CEO Scott Ford clarified that the $80M-$100M guidance for 2025 reflects the staggered start dates and ramp-up schedules of new contracts. If all contracted business were fully operational from January 1, EBITDA would be closer to the $150M potential earnings power figure. He reaffirmed that the 2025 exit run rate is expected to be between $125M and $150M, noting that 12 of the top 25 customers for 2025 are entirely new to the company.

Matthew Smith asked about the drivers of QSR volume growth, which outpaced weak traffic, and whether these drivers like LTOs and innovation are sustainable.

Answer

Chairman, President and CEO Brendan Foley described the business as inherently 'lumpy' due to the timing of customer promotions and limited-time offers (LTOs), which were a key factor in Asia Pacific. However, he also pointed to more durable growth drivers, particularly in the Americas, such as winning new customers and securing innovation wins. These actions are equivalent to gaining market share and provide a more sustainable way to outperform underlying industry traffic trends.

Matthew Smith asked for a breakdown of the $200 million in 2025 supply chain spending between CapEx and cash costs, and inquired about expectations for the 2025 promotional environment.

Answer

CFO David McKinstray stated that over 90% of the $200 million cash outlay for supply chain modernization in 2025 will be classified as CapEx. CEO Gary Pilnick noted that while the category was competitive, the company focuses on ROI and uses all commercial levers, not just promotions, to deliver value.

Matthew Smith asked about the primary growth drivers for the Uncrustables brand for the second half of the year and beyond, specifically whether growth is coming from distribution gains or increased velocity.

Answer

CEO Mark Smucker highlighted that Uncrustables growth is exceeding expectations, driven by the opening of a third production facility. This increased capacity has shifted the focus to demand-generating activities like advertising and innovation, such as the new peanut butter-only SKU. He confirmed the brand is on track to surpass $900 million in sales this year and meet or exceed the $1 billion target in fiscal 2026.

Matthew Smith asked about the forward-looking growth drivers for the Uncrustables brand, questioning whether future growth would come from stronger distribution or increased velocity.

Answer

CEO Mark Smucker expressed strong optimism for Uncrustables, noting the brand is exceeding expectations and is now in a demand-generating mode with the third production site operational. He highlighted that growth is supported by advertising, meeting consumer demand, and new product launches like the peanut butter-only SKU. Smucker confirmed the brand is on track to hit $900 million in sales this year, ahead of schedule, and will meet or exceed its $1 billion target in fiscal '26.

Matthew Smith questioned whether OMV is considering acquisitions in its upstream Energy segment to offset production declines following the Malaysian asset disposal. He also sought OMV's perspective on the refining margin outlook, given recent weakness in both diesel and gasoline cracks.

Answer

CEO Alfred Stern confirmed that inorganic growth is a possibility for the Energy segment to ensure OMV meets its 350,000 boe/d production target by 2030. On refining, he emphasized the strong contribution from the Retail and Commercial business, which accounted for about half of the Fuels & Feedstock segment's H1 results. While acknowledging margin volatility, he upheld the full-year guidance of approximately $8 per barrel.

Matthew Smith from Bank of America questioned if OMV is considering acquisitions in its upstream Energy segment to moderate production declines, especially with the pending Malaysia divestment. He also asked for OMV's perspective on the recent weakness in refining margins and the outlook for gasoline and diesel cracks.

Answer

CEO Alfred Stern acknowledged that inorganic growth is a possibility to meet the 350,000 boe/d production target by 2030, but had nothing specific to report. On refining, he highlighted the strong performance of the Retail and Commercial business, which contributed about half of the Fuels & Feedstock result in H1. While acknowledging margin volatility, he stated OMV is upholding its full-year guidance of around $8 per barrel, noting the company's sensitivity to margin changes is manageable within its overall cash flow.

Questioned the dividend logic, asking if the goal is to maintain a flat total dividend per share. He also asked for the industrial logic behind the Borealis-Borouge merger and followed up on OMV's standalone M&A strategy in the chemicals space outside of polyolefins.

Answer

The dividend policy is progressive for the regular portion, with the special dividend offering flexibility within the payout range; keeping it flat signals commitment to shareholder returns. The merger logic is to create a global top-5 polyolefin player with significant synergy potential. OMV will also continue to grow its own base chemicals and sustainable chemicals business, while remaining open to other inorganic opportunities.