Lamb Weston Holdings, Inc. Q1 FY2025 earnings call

• Tom Werner noted first quarter results were generally in line with expectations, with sales above target driven by volume and price mix. Despite challenges in frozen potato demand and restaurant traffic, efforts to recapture customer share and win new business in international markets were seen. • Announced a restructuring plan including permanently closing the Connell, Washington facility, curtailing production lines, reshaping investments, and reducing global headcount by ~4%. • Bernadette Madarieta discussed first quarter financial results, including adjusted gross profit decline due to voluntary product withdrawal, higher depreciation, and manufacturing costs. Provided details on the restructuring plan, including expected savings, charges, and updated capital expenditure outlook. • Updated fiscal 2025 outlook with net sales range $6.6B-$6.8B, adjusted EBITDA target low end of $1.38B-$1.48B, and adjusted diluted EPS range $4.15-$4.35.

North America Segment: Sales declined 3% versus prior year quarter. Volume declined 4% due to customer share losses and restaurant traffic decline, partially offset by retail channel growth. Price mix increased 1%. Segment-adjusted EBITDA declined $103 million to $276 million, including a ~$21 million charge from voluntary product withdrawal. International Segment: Sales increased 4% versus prior year quarter. Price mix increased 5% due to pricing actions. Volume declined 1% due to exiting lower-priced and lower-margin business in EMEA and voluntary product withdrawal. Segment-adjusted EBITDA declined $39 million to $51 million.

• Net sales target range $6.6 billion to $6.8 billion on constant currency basis. • Adjusted EBITDA target at low end of $1.38 billion to $1.48 billion due to higher manufacturing costs and less favorable mix. • Capital expenditures for fiscal 2025 now ~$750 million, down $100 million from initial plan. • Adjusted SG&A target reduced to $680 million to $690 million, interest expense estimate increased to ~$185 million, and effective tax rate estimated at ~25%.

• Approximately $500 million over five years needed for environmental improvements at manufacturing plants, with timing varying by regulations and potential for government incentives. • Delaying next phase of ERP implementation may impact medium-term benefits, but prioritizing strategic projects in Netherlands and Argentina. • Fixed cost deleveraging from idle lines in plants could persist in near term if restaurant traffic doesn't rebound, affecting gross margins.

Q: Andrew Lazar asked about pricing and industry capacity reduction.

A: Tom Werner stated pricing environment was in line with expectations, and competitive set may pause capacity additions, but time will tell based on restaurant traffic trends.

Q: Ken Goldman inquired about $500 million environmental improvements and ERP delay.

A: Bernadette Madarieta said $500 million is for wastewater capital investments with varying timing and potential government incentives; ERP delay is to focus on business stabilization, with no major impact on medium-term guidance.

Q: Adam Samuelson asked about gross margin impact and cost savings.

A: Bernadette Madarieta explained gross margin impacted by fixed cost deleveraging, but $55 million savings from restructuring and modernization of assets will help offset; $85 million cost savings target for 2026 is incremental to 2025's $55 million.

Q: Robert Moskow asked about pricing in North America and industry supply-demand.

A: Tom Werner said pricing is account-by-account, competitive but disciplined, and industry actions depend on restaurant traffic trends.

Q: Carla Casella asked about restructuring charges and debt leverage.

A: Bernadette Madarieta said 20% of $200M-$250M charges is non-cash (accelerated depreciation), remainder cash; leverage target remains unchanged at 3.5x.