Lamb Weston Holdings, Inc. Q4 FY2025 earnings call

• Company Changes: New CEO Mike Smith and six new Board members; high urgency to capitalize on opportunities. - Business Results: Fiscal 2025 ended with momentum, strong fourth quarter with volume and net sales growth, but price/mix declined. Adjusted EBITDA increased in the quarter, and working capital improved. - Focus to Win Strategy: Includes zero-based budgeting, assessing noncore assets, commercial go-to-market, cost savings of at least $250 million annualized run rate by end of fiscal 2028, strengthening customer partnerships, executional excellence in supply chain (e.g., streamlining operations, plant productivity), and innovation (e.g., global innovation hubs, breakthrough innovations like Lamb Weston Fast Fries). - Cost Savings: Announced $250 million annualized run rate savings to align organization, improve efficiency, and focus on opportunities.

North America: Net sales declined 1% year-over-year. Price/mix dropped 5% due to customer support pricing, but volume rose 4% from regional small and retail customer wins. Adjusted EBITDA fell 7% to $258 million. International: Sales grew 15% year-over-year. Volume increased 16% from recent customer contract wins. Price/mix decreased 1%. Adjusted EBITDA increased $22 million to $63 million.

• Fiscal 2026 Revenue: Range of $6.35 billion to $6.55 billion, 2% decline to 2% growth on constant currency. - Adjusted EBITDA: $1 billion to $1.2 billion, excluding noncash share-based compensation. Impacted by carryover pricing, lower raw potato costs, fixed factory burden, and start-up costs. Cost savings program expected to contribute $200 million by end of fiscal 2027. - Capital Expenditures: Fiscal 2026 expected to be ~$500 million, with ~$400 million for maintenance/modernization and $100 million for environmental projects.

• Macro Uncertainty: Impact on consumer spending and restaurant traffic. - Tariffs: Exposure to oil and ingredients tariffs, with $25 million impact if August 1 tariffs are implemented. - Industry Capacity: Potential supply-demand imbalance, with some capacity announcements delayed/canceled, but not all capacity is equal in terms of capability.

Q: EBITDA margin target for fiscal 2026 and push/pull factors A: Below normalized range due to supporting customers, investing in strategic markets, and cost savings program.

Q: Working capital improvement and inventory levels A: Focus on inventory reduction through better planning and integrated supply chain, expecting $60 million cash flow from inventory improvement in fiscal 2026-2027.

Q: International capacity and projects A: ~1-1.5 billion pounds of capacity delayed/canceled, mostly overseas, pace of new announcements slowed.

Q: Sales outlook and customer momentum A: Both carryover business wins and incremental new opportunities, with stronger sales in second half of fiscal 2026.

Q: Tariffs and risk assessment A: Exposure to tariffs is ~$25 million, mitigating through blends and other measures.

Q: Sales cadence and 53rd week impact A: 53rd week in Q4 helps, with first half pressured by carryover pricing, second half benefiting from customer momentum.

Q: North America capacity and pricing stabilization A: No significant new capacity in North America, projects finalized, not all capacity equal in quality.

Q: Leverage target and M&A A: Target 3.5x leverage, open to M&A/joint ventures in potato industry.

Q: Strategic framework and Europe focus A: Not sharing specific geographies yet, competitive reasons.

Q: Removal of noncash stock-based compensation from adjusted metrics A: To avoid volatility, common in industry, noncash items not managed towards.