Lamb Weston Reports Growth, but Expects Challenges Next Year
Lamb Weston Holdings has announced its fiscal first quarter 2019 results, with met sales at USD914.9m, up 12% versus the year-ago period. On the other hand, the report forecasts that 2019 might bring challenges arising from a poor potato crop.
Price/mix increased 8% due to pricing actions and favorable product and customer mix. Volume increased 4%, driven by growth in the company’s global and retail segments.
Income from operations rose 11% to USD152.6m from the prior year period, which included USD2.2m of pre-tax costs related to the company’s separation from Conagra Brands, on November 9, 2016.
Excluding this comparability item, income from operations grew USD12.8m, or 9%, driven by higher sales and gross profit. Gross profit increased USD34.3m due to favorable price/mix, volume growth, and supply chain efficiency savings.
“We’re pleased with our solid results in the first quarter, with each of our core business segments driving sales growth and expanding product contribution margins. Our results continue to reflect the strong execution by our commercial, supply chain and support teams, as well as our ongoing commitment to invest in our production capacity, operating, sales and product innovation capabilities to support our customers’ growth, improve operating efficiency and execute on our strategies over the long term,” said Tom Werner, president and CEO.
Net sales for the global segment, which is comprised of the top 100 North American based restaurant chain customers as well as the company’s international business, increased to USD466.8m, up 13% compared to the prior year period. Price/mix increased 8%, reflecting the carryover impact of pricing actions taken in the prior year as well as improvement in customer and product mix. Volume increased 5%, driven by the benefit of limited time product offerings and growth in sales to strategic customers in the U.S. and key international markets.
Net sales for the foodservice segment, which services North American foodservice distributors and restaurant chains outside the top 100 North American based restaurant chain customers, increased to USD297.8m, up 7% compared to the prior year period. Price/mix increased 7%, reflecting carryover impact of pricing actions taken in the prior year as well as improvement in customer and product mix. Volume declined nominally as growth in sales of higher-margin Lamb Weston-branded and operator-labeled products largely offset the loss of some lower-margin, distributor-label product volumes.
“For the remainder of fiscal 2019, we continue to anticipate the operating environment in North America will remain generally favorable, with solid demand for frozen potato products and tight manufacturing capacity. However, we expect that our European joint venture, Lamb Weston/Meijer, will face challenges arising from a poor potato crop. Although it’s too early to determine the full impact of these challenges, we believe that Lamb Weston/Meijer’s pricing and cost reduction actions, along with opportunities in our North American and export businesses, enable us to remain on track to deliver on our fiscal 2019 targets.”