Lamb Weston Holdings, Inc. (LW) Earnings

Management highlights

### Executive Transition & Strategic Alignment - Newly appointed Executive Chair Jan Craps, a 20+ year veteran of ABI, has invested significant personal capital in Lamb Weston shares, with compensation tied directly to stock price performance and no participation in the annual incentive plan. - A new Chief Strategy and Technology Officer, Amit Philip, was recently added to the executive team to lead strategy development and technology priorities including AI adoption and ERP modernization. Focus to Win Strategy Progress - The first year of the Focus to Win strategy delivered meaningful progress: six consecutive quarters of volume growth, share gains in North America despite a demand-challenged market, and volume growth in high-opportunity regions including Asia Pacific and Latin America. - Customer centricity improvements include extended contracts for several of the company's largest strategic customers, seamless support for new customer rollouts, and increased U.S. Net Promoter Score that is now the highest among major competitors. Operational & Supply Chain Optimization - A full year of cost savings delivered $100+ million in annualized savings, exceeding the first-year milestone for the program targeting at least $250 million in annual run-rate savings by the end of fiscal 2028. - Completed supply chain optimization actions: opened a new state-of-the-art production facility in Mar del Plata, Argentina; grew double-digit volume at the 2023-opened Inner Mongolia, China facility; announced closure of an older 10% of EMEA production capacity facility in Broekhuizenvorst, Netherlands to rebalance capacity with demand and improve utilization. - Capital discipline was significantly improved: full year fiscal 2026 capital expenditures declined $240 million year-over-year to $410 million, generating $537 million in free cash flow, a substantial year-over-year increase. Innovation & Performance Culture - New product innovation increased the share of net sales coming from new products, with recent launches including new Alexia private label and seasoned items, Lamb Weston batter line extensions, and new olive oil-based products expanding into retail and food service channels. - Employee engagement scores improved in fiscal 2026. Performance culture is being strengthened by adding enterprise, entity, and individual quantitative KPIs to compensation, which already includes ROIC and free cash flow targets, with entity-level net sales, EBITDA, and cash generation targets implemented for fiscal 2027. Shareholder Return - Returned $321 million to shareholders in fiscal 2026 ($208 million in dividends, $113 million in share repurchases), bringing total return since the company's IPO to over $2.2 billion.

Guidance

• Fiscal 2027 overall guidance: Net sales expected to be flat to up 1% against a 52-week adjusted fiscal 2026 base of $6.5 billion. Adjusted EPS is expected in the range of $2.95 to $3.25, compared to a 52-week fiscal 2026 adjusted EPS of $2.90. Adjusted EBITDA is expected between $1.1 billion and $1.2 billion, compared to a 52-week fiscal 2026 comparable adjusted EBITDA of $1.128 billion. • North America segment guidance: Net sales on a comparable week basis expected flat to up low single digits, with low single digit volume growth and low single digit price mix decline. EBITDA expected flat to up low single digits, with price mix investments and cost inflation offset by volume growth and ongoing cost savings. • International segment guidance: Net sales expected down low single digits, with low to mid single digit price mix investment partially offset by low single digit volume growth, and top line growth in regions outside EMEA. International segment EBITDA is expected to improve 40% to 50%, driven by lapping $33 million in pre-tax potato write-offs and Argentina startup costs. • Capital expenditure guidance: Fiscal 2027 cash capital expenditures expected between $380 million and $410 million, with new project accrual capped at $350 million going forward. • First quarter fiscal 2027 cadence: Net sales expected to be flat, with EBITDA expected to decline in the low teens, due to carryover impacts from prior year potato crop and edible oil inflation, with growth ramping through the remainder of the year. • Crop update: North America 2027 crop is off to a strong start with favorable weather and modestly higher contracted acreage to support volume growth. EMEA crop is also off to a favorable start, with planted and contracted acreage down year-over-year aligned with demand rebalancing.

Segment performance

1. North America Segment: - Fourth quarter 2026: Net sales increased 9% year-over-year, with sales volume up 11% and price mix down 2%. Adjusted EBITDA grew 17% ($45 million), with a 26% segment EBITDA margin for the full year. - Full year 2026: Net sales increased 3% year-over-year, driven by 9% sales volume growth partially offset by a 6% price mix decline. The segment included an $86 million benefit from an extra 53rd reporting week. Higher volume, lower per-pound manufacturing costs, and cost savings offset inflation and price mix investments. 2. International Segment: - Fourth quarter 2026: Net sales declined 2% year-over-year, with 2% lower sales volume and a 4% price mix decline, partially offset by favorable currency impacts. Volume growth in Asia Pacific and Latin America was offset by challenging conditions in EMEA, including Middle East conflict-driven disruptions, higher raw potato costs, lower fixed cost absorption, and elevated incremental freight costs. - Full year 2026: Net sales increased 1% year-over-year, driven by 5% favorable currency impact and 2% sales volume growth (concentrated in Asia Pacific and Latin America), partially offset by a 6% price mix decline. On a constant currency basis, net sales declined 4%. Adjusted EBITDA declined due to lower organic sales, higher per-pound manufacturing costs, excess potato write-offs, low facility utilization, and Argentina plant startup costs, partially offset by company-wide cost savings initiatives. The extra 53rd week added $41 million to full-year net sales.

Risks & headwinds

• Persistent competitive pressure and pricing headwinds in the EMEA market, driven by excess industry capacity, reduced European export demand from new capacity in developing markets, and soft QSR traffic, creating ongoing margin pressure for the international segment. • Volatile input cost inflation driven by the ongoing Middle East conflict, particularly for edible oils (driven by biodiesel demand) and transportation costs, with spot cost increases impacting results even with hedging programs in place. • Input cost carryover impacts from fourth quarter fiscal 2026 are expected to weigh on first quarter fiscal 2027 results, creating short-term margin pressure. • Uncertainty around the pace and impact of contract renewals for large North American food service customers, which are in the very early stages of negotiation for the upcoming cycle. • Crop yield and pricing uncertainty remains despite favorable early growing conditions, particularly in EMEA where early-season heat creates uncertainty for final crop output and costs. • Execution risk associated with the multi-phase strategy refresh and organizational changes, with full details not scheduled to be released until the early calendar 2027 investor day.

Analyst Q&A

• Q: Are all options on the table to improve international profitability, including M&A, divestitures, and restructurings, or are there structural limitations to possible actions? /

  A: Management is conducting a fact-based strategy review of international country clusters, evaluating net landed costs and profit pools to define clear roles and resource allocation for each cluster. All options including M&A, partnerships, and divestitures are on the table, with full details to be shared at the 2027 investor day. In the near term, management is already acting to improve EMEA profitability by reducing planted contracted acreage, closing an older high-cost facility to improve utilization by ~10 percentage points, and consolidating volume into more efficient plants. (332 characters)

• Q: How does the company factor in the relatively new capital invested in recent international capacity when evaluating future footprint decisions? /

  A: The company is primarily targeting older facilities nearing the end of their useful lives for closure, moving volume to the newer, more efficient plants the company has already built in high-growth markets. The company notes other industry participants have also curtailed lines or delayed new capacity projects, and scaling modern capacity requires reliable raw material and energy inputs that create barriers to unneeded new build out. (276 characters)

• Q: What is the current status of the paused ERP modernization program? /

  A: New Chief Strategy and Technology Officer Amit Philip is actively reviewing the ERP program as part of his broader technology agenda, which also includes data governance, AI adoption, and cybersecurity. The company has incorporated prior learnings from past ERP implementation efforts to inform the path forward for the program. (209 characters)

• Q: Is there upside potential to expand North America margins beyond the guided flat to low single digit EBITDA growth in fiscal 2027? /

  A: The guidance reflects planned carryover price mix investments from prior contracting, with cost savings expected to offset inflation. Upside could come from favorable channel and product mix, as higher-margin limited-time offers and innovation see renewed customer interest. If unexpected inflation occurs in inputs like edible oil or freight, management will work with customers to adjust pricing dynamically, with many existing multi-year contracts already include cost-linked variability for input price changes. (344 characters)