EAGLE, IDAHO – While reporting quarterly results for the first time, Lamb Weston Holdings, Inc. also revised its guidance upward for its first fiscal year as a stand-alone company.
Lamb Weston, a supplier of frozen potato, sweet potato, appetizer and vegetable products to restaurants and retailers around the world, spun off from Conagra Brands, Inc. on Nov. 9, 2016. Lamb Weston’s net income of $91 million, equal to earnings 59c per share on the common stock, in the second quarter ended Nov. 27, 2016, was up 18% from $77 million, or 50c per share, in the previous year’s second-quarter. Net sales rose 7% to $790.7 million from $740.3 million.
The quarter included 2.5 weeks of stand-alone Lamb Weston results and $9 million of expenses related to the separation of Lamb Weston from Conagra Brands.
The company’s performance in the second quarter and the first half of the year were better than expected, said Tom Werner, president and chief executive officer of Eagle-based Lamb Weston, in a Jan. 10 earnings call.
|Tom Werner, president and c.e.o. of Lamb Weston|
“While we delivered well above our center line of profitability in the first half, we do expect our earnings growth to normalize in the back half of the year, and we’ve taken a prudent view in our revised guidance,” Mr. Werner said. “We now expect net sales to grow in the mid-single digits, up from our initial estimate of low-single digits.
“In addition, on a full-year basis, we expect sales growth to be relatively balanced between price mix and volume as we continue to stretch existing capacity to meet demand. For adjusted EBITDA including unconsolidated joint ventures, we now expect it to grow at a rate in the mid-teens, up from our previous estimate of high-single digits. This reflects strong adjusted operating income growth driven by sales growth and supply chain operating leverage while our raw materials for the balance of the year will be essentially flat to year-ago levels.”
Lamb Weston also now has an outlook of $2.20 to $2.28 in adjusted diluted e.p.s. for the fiscal year.
Income from operations in the second quarter increased 15% to $126 million from $110 million in the previous year’s second quarter. Sales volume increased 4 percentage points as productivity programs and manufacturing plant performance stretched available capacity. Price/mix increased 3 percentage points due to pricing actions and favorable product and customer mix.
“We’re in the process of adding capacity that will come on-line in the back half of calendar 2017, which is well ahead of recently announced capacity expansions in North America by our competitors,” Mr. Werner said. “We expect this to provide us with the ability to gain share and support our customer’s growth plans in the near term.”
Lamb Weston’s Foodservice segment in the second quarter reported sales of $250.6 million, which was up 11% from $225.2 million in the previous year’s second quarter. The segment’s product contribution margin rose 39% to $80 million, driven by favorable price/mix, supply chain efficiency savings and volume growth.
Sales volume in the segment increased 5 percentage points, largely behind growth of small and mid-sized restaurant chain operators as well as regional and independent food distributors.
The company’s Global segment had second-quarter sales of $412.6 million, up 6% from $388.3 million. Driven by growth in domestic and international markets, volume added 5 percentage points.
The Retail segment’s second-quarter sales of $96.5 million were up 5% from $91.8 million. Volume increased 4 percentage points, largely driven by the growth of licensed brands and private label.Companywide Lamb Weston in the six months ended Nov. 27, 2016, posted net income of $174.1 million, or $1.14 per share, which was up 24% from $140.5 million, or 92c per share, in the same time period of the previous year. Net sales in the six-month period rose 5% to $1,567 million from $1,488.1 million.