A write-down of surplus potato inventory struck Lamb Weston Holdings in the second quarter, resulting in a more than halving of growth in a critical profit statistic.

The supplier of frozen potato goods from the US incurred charges of USD71m, of which USD65m were recorded as cost of sales and USD6m as equity method investment earnings. As a result, in the three months ending November 26, adjusted EBITDA increased by 15% to USD377m. Excluding the charge, the metric increased 36% to USD448m, according to a recent Lamb Weston Holdings Earnings Call Transcript.

Discussing the results with analysts on January 4th, president and CEO Tom Werner said Lamb Weston had overestimated the speed of recovery in consumer demand and consequently had overbooked contracted potato harvesting requirements.

“Per our agreements with our growers, we’re obligated to purchase all the potatoes grown on these contracted acres. However, our initial sales forecast has turned out to be more aggressive than our current estimate, reflecting recent restaurant traffic demand trends as consumers continue to absorb the cumulative effect of inflation. As a result, we have purchased more potatoes than we need to meet our current sales targets and have taken a charge to write off the estimated excess. Although overall demand growth is slower than we anticipated a year ago, it remains resilient”, Werner mentioned.