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Nov 29, 2020
Lamb Weston Q2 2021 Earnings Report
Lamb Weston's financial performance declined due to decreased demand for frozen potato products and the impact of the COVID-19 pandemic.
Key Takeaways
Lamb Weston reported a 12% decrease in net sales to $896 million and a 31% decrease in diluted EPS to $0.66 for the second quarter of fiscal year 2021. The decline was primarily due to decreased demand for frozen potato products outside the home following government-imposed restrictions on restaurants and other foodservice operations to slow the spread of the COVID-19 virus.
Net sales declined 12% to $896 million.
Income from operations declined 28% to $140 million.
Diluted EPS declined 31% to $0.66.
EBITDA including unconsolidated joint ventures declined 18% to $213 million.
Lamb Weston
Lamb Weston
Forward Guidance
Lamb Weston anticipates facing challenging and volatile operating conditions until the virus is broadly contained, and that demand may soften, especially at full-service restaurants, as governments continue to impose broad social restrictions and as colder weather limits outdoor dining. However, the Company believes that global restaurant traffic will improve through calendar year 2021, which will lead to overall frozen potato demand approaching pre-pandemic levels, on a run-rate basis, by the end of the calendar year.
Positive Outlook
- The possibility of wide availability of government-approved COVID-19 vaccines by mid-calendar 2021 may allow governments to gradually ease broad social restrictions in their respective jurisdictions, which would likely have a favorable impact on restaurant traffic.
- Shipments to large chain restaurant customers, which are composed of QSR and large full-service chain restaurants, were more than 95 percent of prior-year levels.
- Shipments to customers served by the Company’s Retail segment were above prior-year levels, with strength in the Company’s premium and mainstream branded offerings.
- Global restaurant traffic will improve through calendar year 2021, which will lead to overall frozen potato demand approaching pre-pandemic levels, on a run-rate basis, by the end of the calendar year.
- The company will continue to prioritize the health and welfare of its employees, maintain product safety, and continue to support its customers as they manage their supply chains and inventories.
Challenges Ahead
- Demand may soften, especially at full-service restaurants, as governments continue to impose broad social restrictions and as colder weather limits outdoor dining.
- Demand softened during the latter half of the fiscal second quarter, reflecting the negative impact on restaurant traffic at full-service restaurants related to governments reimposing social restrictions and reduced outdoor dining due to the onset of colder weather.
- The Company believes these factors will further negatively impact shipments during the fiscal third quarter.
- Shipments to the Company’s key international markets, which are primarily in Asia, Oceana and Latin America, were mixed, and were largely softer than shipment rates realized during the latter half of the fiscal second quarter.
- The Company expects that it will continue to incur additional costs as a result of the pandemic’s impact on its operations, at least through the remainder of fiscal 2021.