Lamb Weston Holdings, Inc. Q1 FY2026 earnings call

Key Messages from Mike Smith:

• Delivered strong volume growth, driven by innovation, quality, consistency, and customer focus.
• Progress on Focus to Win strategy, including cost savings program tracking to achieve at least $250M annual run rate savings by FY-end 2028.
• New innovative products launching this fall, including retail offerings and international artisanal fries.
• Restarted a curtailed line in North America in response to sustained volume growth.
• Positioning for long-term success by prioritizing markets and products with sustainable competitive advantage.

Bernadette Madarieta's Comments:

• First quarter net sales essentially flat, with constant currency net sales down 1%. Volume increased 6% led by North America and Asia.
• Adjusted gross profit declined mainly due to unfavorable price mix, partially offset by higher sales volume and cost savings.
• Adjusted SG&A declined $24M vs prior year, reflecting cost savings and one-time items.
• Liquidity healthy with $1.4B liquidity, free cash flow $273M, and capital expenditures $79M for the quarter.

North America: Net sales declined 2% compared with the prior year, primarily due to lower net selling prices. Price mix declined 7%, and volume increased 5%, supported by recent customer contract wins and growth across channels. International: Net sales increased 4%, including a favorable $24 million impact from foreign currency translation. At constant currency rates, net sales were flat. Volume grew 6% in the quarter, and price mix at constant currency rates declined 6%.

Fiscal 2026 Outlook:

• Reaffirms revenue at constant currency rates in range $6.35B-$6.55B (2% decline to 2% increase).
• Adjusted EBITDA range $1B-$1.2B.
• Tariffs now incorporated in guidance.
• Gross profit margins expected relatively flat in Q2.
• Tax rate guidance updated to 26%-27%, with first half in low thirties and second half in low 20s.

• Competitive activity increase in Latin America, notably Brazil.
• Potential impact of tariffs on palm oil and other ingredients.
• Manufacturing start-up costs and longer-than-expected maintenance downtime affecting margins.

Q: Andrew Lazar asked about restarting a curtailed production line in the US and industry capacity delays.

A: Mike Smith said restarting the line is to maintain customer fill rates due to volume growth, and industry capacity announcements have slowed with some delayed or canceled.

Q: Tom Palmer inquired about price mix and tariff exposure.

A: Bernadette Madarieta said price mix on constant currency is mid-high single-digit decrease in first half and moderating in back half; tariff exposure on palm oil etc. is ~$25M annualized with a vote in March affecting Indonesia tariff.

Q: Peter Galbo asked about gross margin seasonality.

A: Bernadette Madarieta said gross margin expected flat Q2, then seasonal step up in Q3 and decline in Q4.

Q: Max Gumport asked about customer wins driving growth in North America.

A: Mike Smith and Bernadette Madarieta said some new customers started earlier than expected, lapping prior year voluntary product withdrawal in international segment.

Q: Matt Smith asked about impact of restarting curtailed line and cost savings phasing.

A: Mike Smith said restarting is easier than new plant start-up, and cost savings on track for $100M run rate in 2026 with two-thirds affecting gross profit and third SG&A.

Q: Scott Marks asked about business wins driver.

A: Mike Smith said it's due to customer-centric approach, joint business planning, and focus on service, quality, consistency.

Q: Steve Powers asked about customer service scorecard and Argentina facility ramp-up.

A: Mike Smith said there are opportunities for customer service improvement, and Argentina facility takes time to reach target utilization.

Q: Marc Torrente asked about SG&A run rate and new customer wins.

A: Bernadette Madarieta said one-third of cost savings benefit SG&A, and new customer wins pulled forward volume growth but planned in original guidance.

Q: William Royer asked about new customer wins profitability and CapEx outlook.

A: Mike Smith said new customers are added profitably, and CapEx for 2026 is ~$500M with $400M maintenance and $100M environmental over next years.