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Nov 28, 2021
Lamb Weston Q2 2022 Earnings Report
Net sales increased, while income from operations and net income declined due to cost inflation and supply chain disruptions.
Key Takeaways
Lamb Weston's Q2 2022 results showed a 12% increase in net sales, driven by strong demand in North America's restaurant and foodservice channels and pricing actions. However, income from operations and net income decreased due to higher manufacturing and distribution costs, cost inflation, and supply chain disruptions.
Net sales increased 12% to $1,007 million, with volume and price/mix each up 6 percent.
Income from operations declined 18% to $114 million due to lower gross profit and higher SG&A expenses.
Net income declined 66% to $33 million, and Diluted EPS decreased 67% to $0.22.
Adjusted EBITDA including unconsolidated joint ventures declined 15% to $181 million.
Forward Guidance
Lamb Weston expects net sales growth to be above its long-term target, driven by price/mix improvements. Net income and Adjusted EBITDA are expected to be pressured due to inflation and operational challenges.
Positive Outlook
- Fiscal 2022 net sales growth will be above its long-term target of low-to-mid single digits.
- Net sales growth in the second half of fiscal 2022 will be driven largely by price/mix.
- Company expects to continue to benefit from solid global demand for frozen potato products.
- Ongoing investments in information technology, including the second phase of its ERP project, will improve its ability to support growth and margin improvement over the long-term.
Challenges Ahead
- Net income and Adjusted EBITDA including unconsolidated joint ventures will be pressured for the remainder of fiscal 2022.
- Company manages through significant inflation for key production inputs, transportation and packaging compared to fiscal 2021 levels.
- Industrywide operational challenges, including labor shortages, and upstream and downstream supply chain disruptions, resulting from volatility in the broader supply chain.
Historical Earnings Impact
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Avg. Return Before/After Earnings
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