Top management at Lamb Weston recently revealed a plan for restructuring that they suggestively titled the ‘Restructuring Plan.’ This plan aims to increase cash flows, boost operational and cost efficiencies, and position the company to continue making strategic investments to create long-term value for its stakeholders.

The ‘Restructuring Plan’ calls for temporarily suspending a few production lines and schedules throughout the company’s North American manufacturing network, as well as the permanent closure of the Connell, Washington, manufacturing plant on October 1, 2024.

Additionally, the plan calls for an USD100m drop in capital expenditures from the company’s previous estimate of USD850m for fiscal 2025, as well as a reduction in operating expenses that includes headcount reductions of approximately 4% of the company’s global workforce and the elimination of some unfilled job positions.

Top management of Lamb Weston projects that in fiscal 2025, the Restructuring Plan will result in pre-tax cost reductions of about USD55m and a decrease in working capital. The company’s revised fiscal 2025 financial projections take into account the projected savings and cash flow improvements.

“In connection with the Restructuring Plan, the company expects to record total estimated pre-tax charges of USD200m to USD250m, of which the company estimates that approximately 80% will be cash and 20% will be non-cash. The charges primarily relate to the cost of contracted raw potatoes that will not be used due to production line curtailments, accelerating depreciation of assets, the write-down of inventory and long-lived assets, employee severance and other one-time termination benefits, and other costs. The Company expects to record most of the pre-tax charges in the second quarter of fiscal 2025, with the remainder expected to be recorded during the second half of fiscal 2025,” Lamb Weston announced.

International Summary

Net sales for the International segment, which includes all sales to customers outside of North America, increased from USD20.5m to USD550.4m, up 4% versus the prior-year quarter. Volume declined by 1%, due to the carryover effect of the company’s decision in the prior year to exit certain lower-priced and lower-margin businesses in Europe to strategically manage customer and product mix, as well as the impact of the voluntary product withdrawal. The volume decline was partially offset by growth in key international markets outside of Europe. Price/mix increased by 5% reflecting pricing actions announced this fiscal year to counter input cost inflation.

International Segment Adjusted EBITDA declined from USD39.1m to USD50.5m. An approximately USD18m impact associated with the voluntary product withdrawal and higher manufacturing costs per pound largely drove the decline, which was partially offset by the benefit of inflation-driven pricing actions.

“We delivered first quarter financial results that were generally in line with our expectations, driven by sequentially improved volume performance, solid price/mix, and strict management of operating costs. However, restaurant traffic and frozen potato demand, relative to supply, continue to be soft, and we believe it will remain soft through the remainder of fiscal 2025.”

“To drive operational and cost efficiencies, we are taking actions that include the permanent closure of an older, higher-cost processing facility and the temporary curtailment of certain production lines and schedules in our manufacturing network. Together, we expect these actions will help us better manage our factory utilization rates and ease some of the current supply-demand imbalance in North America. We are also taking actions to reduce operating expenses, including reducing headcount and eliminating certain unfilled job positions, as well as reducing capital expenditures. The combined estimated savings from these actions are reflected in our updated fiscal 2025 targets.”

“These actions are proactive steps designed to improve our operating efficiency, profitability, and cash flows, while also positioning us to continue to make strategic investments to support our customers and create value for our stakeholders over the long term,” Tom Werner, President and CEO, concluded.