Lamb Weston Holdings in expansion mode

by Keith Nunes
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Lamb Weston fries
Lamb Weston is expanding its frozen potato and french fry capacity to meet growing global demand.
 

EAGLE, IDAHO — Potato processor Lamb Weston Holdings, Inc. is in an enviable position in the food and beverage industry. While other companies have initiated cost reduction programs to drive profitability, Lamb Weston Holdings is adding manufacturing capacity to drive the company’s top- and bottom-line performance.

In October, Lamb Weston announced completion of the expansion of its manufacturing plant in Richland, Wash. Total investment in the project was approximately $200 million and includes a new processing line as well as increased capacity for frozen french fries.

Then, in December, the company announced plans to expand its manufacturing plant in Hermiston, Ore. The project will cost approximately $250 million, include the construction of a 300-million-lb per-year french fry line, and be completed by the fourth quarter of fiscal 2019.

Tom Werner, Lamb Weston
Tom Werner, president and c.e.o. of Lamb Weston

“We aim to be the No. 1 global potato company by creating solutions that inspire and serve our customers and consumers with the food they love and trust,” said Tom Werner, president and chief executive officer, during a Jan. 4 conference call with investment analysts to discuss financial results for the second quarter of fiscal 2018. “Today, we’re No. 1 in North America and a strong No. 2 globally. But being No. 1 means more than just focusing on market share.

“ …We are looking to accelerate growth of the frozen potato category by investing in and supporting specific customers, restaurant segments and markets as well as expanding our range of product offerings through innovation. In our global unit, that means continuing to focus on our traditional restaurant segments and customers, like quick service and fast casual, burger and chicken chains, while penetrating nontraditional frozen potato product outlets, such as convenience stores and coffeehouses. It also means continued focus on fast-growing markets like China and Southeast Asia, and continued support of our growing customers across North America and internationally.”

Lamb Weston pull quote
 

During the second quarter ended Nov. 26, 2017, Lamb Weston Holdings' net income equaled $76.6 million, equal to 52c per share on the common stock, a decline compared with the same period of the previous year when the company earned $87.2 million, or 59c per share.

Sales for the quarter rose 4% to $824.6 million from $790.7 million the previous year.

In November 2016, Lamb Weston Holdings was spun off from Conagra Brands, Inc., and the fiscal 2017 financial results have been “carved out” of Conagra Brands’ results for the period, according to the company.

As a result of the positive results, management raised the company’s outlook for the rest of fiscal 2018 and expects sales growth to be in the mid-single digits and full-year EBITDA to be in a range between $780 million to $790 million.

“… We’ve raised our outlook for the year based on our solid first-half performance in getting past some key operating milestones, including finishing customer contract negotiations, fully assessing the fall potato harvest and starting up our Richland production line,” said Robert M. McNutt, chief financial officer. “We feel good about how the year is progressing, and believe that we have good visibility on the operating environment and customer and consumer dynamics affecting the North American and global frozen potato category. This gives us confidence that we can deliver our higher sales and earnings targets for fiscal 2018.”

Mr. Werner said Lamb Weston will accelerate growth by investing and supporting specific customers, restaurant segments and by expanding the company’s range of product offerings. He added that the company turned away or walked away from some business due to capacity constraints.

“We believe that demand will continue to grow at an attractive rate for the foreseeable future,” he said. “And industry capacity will continue to be challenged to keep up with that growth over the long term. Lamb Weston has consistently committed capital to increase capacity. In the past fiveyears and including our recent announcement to expand our Hermiston facility, we will have invested more than $800 million to expand capacity.” 
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