Lamb Weston’s Q3 Sales and Profit Up, Net Income Down

Eagle, Idaho, USA-headquartered Lamb Weston Holdings, Inc. has reported a net sales gain of 5% to $768.5 million for the 2017 third quarter, which ended on February 26. Income increased by 14% to $145.2 million compared to the same period in 2016, as gross profit rose from $181.9 million to $207 million. Net income, however, declined from $108.7 million to $87.6 million.

Since being spun off from Conagra Brands last November, the producer of frozen french fries, other potato specialties, vegetables and appetizers has rung up back-to-back earnings report increases. Sales for the 39-week period ending on February 26 rose from $2,168.8 million to $2,225.8 million.

lamb weston friesVolume during the third quarter ticked up 1% in both United States and international markets, as Lamb Weston continued to operate at full capacity. A favorable price/mix largely drove the increase. On a per pound basis, while raw potato costs were essentially flat versus the prior year period, other inputs, manufacturing, transportation and warehousing costs increased, partially offset by supply chain efficiency savings. Selling, general and administrative expense increased, largely due to incremental costs associated with being a stand-alone public company, as well as higher incentive compensation costs as a result of the strong operating performance.

“We’re pleased with our third quarter results and year-to-date performance,” said Tom Werner, president and chief executive officer. “The quarter played out as we expected. Continued price/mix improvement and modest volume gains drove both sales and product contribution margin growth in an operating environment of solid consumer demand, modest input cost inflation and tight manufacturing capacity. As a result, we remain on track to deliver on our full-year targets by continuing to focus on serving our customers and executing against our strategies and priorities.”

Net sales for the global segment increased 3% to $392 million, while the contribution margin rose 9% to $93 million. Price/mix increased 2%, largely reflecting improvement in customer and product mix as well as price increases.

LW logoNet sales in the foodservice sector advanced 10% to $242 million, as the foodservice product contribution rose 30% to $84 million. Price/mix increased 10%, reflecting pricing actions as well as improvement in customer and product mix.

Retail segment net sales edged up 1% to $100 million. Volume also increased 1%, primarily driven by growth of licensed brands and private label products. The product contribution margin was flat at $23 million, with higher gross profit offset by increased advertising spending.