On October 2, 2024, Lamb Weston Holdings Inc (LW, Financial) released its 8-K filing for the first quarter of fiscal 2025. Lamb Weston, North America's largest and the world's second-largest producer of branded and private-label frozen potato products, reported a decline in net sales and income, prompting a restructuring plan to drive operational efficiencies.
Performance Overview
For Q1 FY 2025, Lamb Weston Holdings Inc (LW, Financial) reported:
| Metric | Q1 FY 2025 | Year-Over-Year Growth |
|---|---|---|
| Net Sales | $1,654 million | -1% |
| Income from Operations | $212 million | -34% |
| Net Income | $127 million | -46% |
| Diluted EPS | $0.88 | -45% |
| Adjusted Income from Operations | $187 million | -43% |
| Adjusted Net Income | $105 million | -56% |
| Adjusted Diluted EPS | $0.73 | -55% |
| Adjusted EBITDA | $290 million | -30% |
Key Financial Metrics and Challenges
Net sales declined by 1% year-over-year to $1,654 million, driven by a 3% decrease in volume due to customer share losses, soft restaurant traffic, and a voluntary product withdrawal. Price/mix increased by 2%, reflecting inflation-driven pricing actions in Europe and North America.
Gross profit fell by $143.5 million to $356 million, impacted by higher manufacturing costs, a $39 million loss from the product withdrawal, and increased warehouse costs. Adjusted Gross Profit declined by $137.2 million to $353.1 million.
Operating expenses decreased by $32.3 million to $143.9 million, including a $16.6 million gain from blue chip swap transactions in Argentina. However, Adjusted SG&A increased by $5.5 million to $165.9 million due to higher non-cash amortization and ERP system expenses.
Restructuring Plan
To address these challenges, Lamb Weston announced a restructuring plan expected to generate $55 million in pre-tax cost savings and reduce capital expenditures by $100 million in fiscal 2025. Key actions include:
- Closing the Connell, Washington facility
- Temporarily curtailing production lines and schedules in North America
- Reducing the global workforce by approximately 4%
- Eliminating unfilled job positions
The company expects to record pre-tax charges of $200 million to $250 million related to these actions.
Updated Fiscal 2025 Outlook
Lamb Weston reaffirmed its net sales target of $6.6 billion to $6.8 billion but lowered its GAAP net income target to $395 million to $445 million and diluted EPS target to $2.70 to $3.15. The company also reduced its Adjusted Net Income target to $600 million to $615 million and Adjusted Diluted EPS target to $4.15 to $4.35.
Segment Performance
In the North America segment, net sales declined by 3% to $1,103.7 million, with a 4% decrease in volume. Adjusted EBITDA for the segment fell by $103.3 million to $276.1 million.
The International segment saw a 4% increase in net sales to $550.4 million, driven by a 5% increase in price/mix. However, Adjusted EBITDA for the segment declined by $39.1 million to $50.5 million.
Liquidity and Cash Flows
Net cash provided by operating activities was $330.2 million, down $4.4 million year-over-year. Capital expenditures increased by $30.9 million to $335.6 million. As of August 25, 2024, the company had $120.8 million in cash and cash equivalents.
Conclusion
Lamb Weston Holdings Inc (LW, Financial) faces significant challenges, including declining sales and higher manufacturing costs. The restructuring plan aims to improve operational efficiency and profitability. Investors will be closely watching the company's ability to navigate these challenges and achieve its updated fiscal 2025 targets.
Explore the complete 8-K earnings release (here) from Lamb Weston Holdings Inc for further details.
