Q4 2024 Earnings Summary
- Lamb Weston expects volume growth in the second half of fiscal 2025 due to recent customer contract wins and a strong sales pipeline, with some share gains already committed.
- Management is confident in regaining market share and is seeing wins in the marketplace today, which gives confidence in driving future growth.
- The company has resumed shipping to customers after the voluntary product withdrawal, indicating resolved operational issues and potential recaptured sales.
- Lamb Weston experienced worsening market share losses in Q4, particularly with higher-margin customers, due to both increased competition offering better prices and execution issues, including customer service challenges related to ERP implementation. Reversing these losses may be challenging.
- The company is facing soft global demand, including declining restaurant traffic in key markets, leading to higher available industry capacity and pricing pressures. This challenging operating environment may impact volumes and margins in the near term.
- Due to the soft demand environment, Lamb Weston is evaluating cost management measures across the company, including possible adjustments to asset utilization rates and rephasing capital investments, indicating potential operational downsizing or underutilization of new capacities.
-
Capacity Utilization & Market Imbalance
Q: What's your capacity utilization and view on supply-demand imbalance?
A: Management declined to provide current capacity utilization rates , noting that they have two new facilities becoming operational in China and American Falls. They expect to gradually ramp up capacity over the next 18 months, but the current demand environment may stretch that out. They acknowledged losing higher-margin customers during the ERP transition and face a competitive environment due to incremental supply and softening restaurant traffic trends. Quick Service Restaurants (QSRs), accounting for 80% of french fry consumption, are experiencing continued deceleration in traffic, making contracting more challenging than ever. -
Pricing Concessions & Reinvestment
Q: Are you making pricing concessions to regain customers?
A: Management is making strategic choices to invest back with customers and win their business back. They are not commenting on ongoing contract negotiations. The challenges during the ERP implementation significantly impacted independent restaurants, leading to substantial share loss. They acknowledge a competitive environment with incremental supply and softening restaurant traffic trends. -
Operational Adjustments & Capacity Rightsizing
Q: Are you considering capacity rightsizing or closing older facilities?
A: Management is evaluating various options across the company to manage costs based on current operating conditions. While not commenting specifically on potential capacity rightsizing, they are looking at all areas to adjust as needed.
Research analysts covering Lamb Weston Holdings.