For its fiscal second-quarter 2022, Lamb Weston Holdings reports its net sales increased USD110.5m to USD1,006.6m, up 12% versus the prior-year quarter, with volume and price/mix each up 6%.
“The Company expects fiscal 2022 net sales growth will be above its long-term target of low-to-mid single digits. The Company anticipates net sales growth in the second half of fiscal 2022 will be driven largely by price/mix as the Company’s recent pricing actions are more fully implemented in the market. The Company expects to continue to benefit from solid global demand for frozen potato products, although growth in sales volumes may be tempered by disruptions to the Company’s production and logistics networks, as well as the effect of the COVID-19 variants on restaurant traffic and consumer demand,” according to a recent company press release.
On the other hand, income from operations declined USD25.2m to USD114.4m, down 18% versus the prior-year quarter, reflecting lower gross profit and higher selling, general and administrative expenses (“SG&A”). Gross profit declined USD18m, as the benefits from increased sales volumes and higher price/mix were more than offset by higher manufacturing and distribution costs on a per-pound basis.
“The increase in costs per pound […] reflected the effect of labor shortages on production run-rates, as well as lower raw potato utilization rates. The increase in per-pound costs was partially offset by supply chain productivity savings. The decline in gross profit also included a USD6.1m decrease in unrealized mark-to-market adjustments associated with commodity hedging contracts, which includes a USD1m loss in the current quarter, compared with a USD5.1m gain related to these items in the prior-year quarter,” the company analysts added.
Net Income Down
Lamb Weston Holdings’ net income reports USD32.5m, down USD64.4m versus the prior-year quarter, and Diluted EPS was USD0.22, down USD0.44 versus the prior-year quarter. The declines were driven by a loss of USD53.3m (USD40.5m, or USD0.28 per share, after-tax) associated with the extinguishment of debt, as well as lower income from operations and equity method investment earnings.
Excluding a loss of USD40.5m after-tax for the extinguishment of debt, net income was USD73.0m, down USD23.9m versus the prior-year quarter, and Adjusted Diluted EPS was USD0.50, down USD0.16 versus the prior-year quarter, reflecting lower income from operations and equity method investment earnings.
Adjusted EBITDA including unconsolidated joint ventures declined USD32.3m to USD180.9m, down 15% versus the prior-year quarter, driven by lower income from operations and equity method investment earnings.
“We generated strong sales as solid demand across our restaurant and foodservice sales channels in North America drove volume growth, and as we continued to implement pricing actions in each of our business segments. These pricing actions, along with the other strategic actions we’ve taken to offset cost pressures and improve throughput in our factories, led to sequential gross margin gains in the quarter,” Tom Werner, president, and CEO mentioned. “We expect our pricing actions, productivity improvements in our factories, and product optimization efforts to mitigate the effect of the ongoing macro-operational challenges and higher potato costs resulting from an exceptionally poor harvest in the Pacific Northwest. We remain confident in the strong long-term outlook for the global frozen potato category, and believe that executing on our strategies and ongoing investments in our business will keep us on a path to deliver sustainable, profitable growth and create value for our stakeholders.”
