Food and Beverage Business
Finance

Lamb Weston experiences impact of surplus potato inventory write-off

Lamb Weston experiences impact of surplus potato inventory write-off Lamb Weston Holdings Food and Beverage Business

In the second quarter, Lamb Weston Holdings in the food and drink business reported a significant decline in adjusted EBITDA growth due to an excess potato inventory write-down, which led to total charges of $71m. This had a substantial impact on the company’s profit metrics, resulting in adjusted EBITDA growth of 15% to $377m. Excluding the charge, the metric increased to 36% at $448m. President and CEO Tom Werner explained that Lamb Weston overestimated the speed of recovery in consumer demand, leading to higher-than-needed contracted potato harvesting requirements.

Werner stated, “We have purchased more potatoes than we need to meet our current sales targets and have taken a charge to write-off the estimated excess.” Despite this setback, Lamb Weston reaped sales benefits from the 2022 buyout of Lamb Weston-Meijer, with sales for the fiscal 2024 second quarter rising 36% to $1.7bn.

Moreover, Lamb Weston saw a 12% improvement in the price/mix component, while inflation-related pressures on input costs eased to mid-single digits. The outlook for adjusted net income and adjusted diluted EPS was raised, with adjusted net income expected to reach $830-$900m and adjusted diluted EPS at $5.70 to $6.15. Nonetheless, Lamb Weston still expects volumes to be negative for the full 2024 fiscal year.

Due to the excess potato inventory write-down, Lamb Weston is focused on regaining confidence in consumer demand and improving volume trends. The company is maintaining its net sales guidance at $6.8-$7bn and is optimistic about the future.

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