• Net Sales: Increased 4% compared with the prior year period.
• Volume Growth: Increased 9%, driven by replacing lost volume and new customer contracts.
• Adjusted EBITDA: Increased $20 million to $364 million.
• North America Net Sales: Grew 4% with an 8% volume improvement.
• International Sales Growth: Increased 5% with a 12% volume increase.
• Adjusted Gross Profit: Declined $7 million due to unfavorable price/mix and higher costs.
• Liquidity: Approximately $1.1 billion, with $1.05 billion available under revolving credit and $68 million in cash.
• Net Debt: $4.2 billion with a leverage ratio of 3.4 times.
• Cash from Operations: $485 million, up $4 million from the prior year.
• Capital Expenditures: $563 million through the third quarter, targeting $750 million for fiscal 2025.
• Shareholder Returns: $151 million returned, including $100 million in share repurchases and $51 million in dividends.
• Fiscal 2025 Revenue Outlook: Expected to be in the range of $6.35 billion to $6.45 billion.
• Fiscal 2025 Adjusted EBITDA Outlook: Expected to be in the range of $1.17 billion to $1.21 billion.
• Effective Tax Rate: Targeting approximately 28% for the full year.

• Warning! GuruFocus has detected 5 Warning Signs with LW.

Release Date: April 03, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Lamb Weston Holdings Inc (NYSE:LW) reported a 9% increase in volume for the third quarter, reflecting successful efforts to regain business and grow volume.
• The company achieved a 4% increase in net sales and a 6% growth in adjusted EBITDA, indicating improved financial performance.
• Lamb Weston Holdings Inc (NYSE:LW) has engaged AlixPartners to accelerate an end-to-end value creation plan, focusing on unlocking value both in the near and long term.
• The company has launched new innovative products, such as fridge-friendly fries and tots, expanding its addressable market.
• Lamb Weston Holdings Inc (NYSE:LW) is on track to deliver at least $55 million of pre-tax savings in fiscal 2025 and $85 million in fiscal 2026 through its restructuring plan.

Negative Points

• The consumer environment remains challenging, with increased uncertainty and stretched consumer budgets impacting demand.
• Price/mix declined by 5% compared to the prior year quarter due to planned investments in price to compete in a competitive environment.
• Soft restaurant traffic trends, particularly in the QSR segment, have negatively impacted volume expectations.
• Higher transportation and warehousing costs, along with increased inventory levels, have put pressure on adjusted gross profit.
• The company faces potential impacts from tariffs and retaliatory tariffs, which could affect its financial results and global operations.

Q & A Highlights

Q: How do you anticipate the ongoing weak restaurant traffic trends and additional industry capacity will impact QSR contract negotiations this summer? A: Mike Smith, President & CEO, explained that customer contract negotiations have not yet started and will begin in the summer. While potato prices are expected to decline, other inflationary impacts will offset some of this favorability. Additionally, potential tariffs and retaliatory tariffs will need to be considered during negotiations.

Q: Can you provide more context on the AlixPartners agreement and where the bigger opportunities lie? A: Mike Smith stated that the focus is on a comprehensive value creation plan, which includes cost reduction, productivity improvements, and growth strategies. The plan addresses the entire P&L, including top-line growth, manufacturing, logistics, procurement, and SG&A. The goal is to improve fundamentals and drive long-term growth.

Q: Why is there a more significant headwind from higher fixed cost absorption in Q4 compared to last quarter? A: Bernadette Madarieta, CFO, explained that the cost of inventory sold in Q3 was mostly produced in Q2, which had fewer curtailed production lines. In Q4, costs will reflect three months of curtailed production, leading to higher cost per pound due to fixed factory burden.

Q: Is there any conservatism built into the implied Q4 EPS guidance? A: Bernadette Madarieta indicated that the guidance reflects current expectations without additional conservatism. The guidance considers soft restaurant traffic and increased costs related to curtailed production lines.

Q: What are your plans for the Connell plant, and how do you view new capacity from competitors? A: Mike Smith mentioned that selling the Connell plant is not currently in the best interest of the business. Regarding competitor capacity, some new facilities have been delayed, and some processors are taking extended downtime or reducing acres, similar to Lamb Weston.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.