Lamb Weston Holdings, Inc. Q2 FY2026 earnings call

• Focus to Win strategy: Strengthening customer partnerships, driving cost savings, and building a culture of continuous improvement. • Volume growth: Second quarter volume up 8%, 7% for first half. Reopened North American capacity to maintain customer fill rates. • Cost savings: Well on track to meet annual target, improving processes and efficiencies. • Dividend increase: Board approved 3% increase to quarterly dividend. • International markets: Latin America new facility ramping up, Europe facing pricing pressure due to strong crop and soft traffic. • Crop update: Harvest completed, yields above average in North America and Europe.

North America: Net sales were essentially flat year-over-year. Volume increased 8% supported by customer contract wins and share gains. Adjusted EBITDA increased 7% to $288 million, driven by higher sales volume and lower manufacturing cost per pound, offset by price and trade to support customers. International: Net sales increased 4% including foreign currency impact, but at constant currency, net sales declined 1%. Volume grew 7%, but adjusted EBITDA declined $21 million to $27 million due to price and trade to support customers, higher manufacturing costs, and start-up expenses in Latin America.

• Reaffirming fiscal 2026 adjusted EBITDA guidance range of $1 billion to $1.2 billion, expecting to finish near midpoint. • Continued volume growth expected in North America in second half, international volumes flat year-over-year. • Second half gross margin expected to be flat to down versus first half 20.4% due to price mix dynamics and higher manufacturing costs internationally. • Full-year tax rate projected at 28% to 29%, second-half rates in low 20s.

• Competitive environment and soft restaurant traffic globally. • International market challenges including softer traffic, added capacity, and strong comparisons. • Input cost inflation outside of raw potato prices, including tariffs, labor, fuel, etc. • Re balancing supply and demand globally, which may involve temporary production adjustments in some regions.

Q: Bernadette, you mentioned rebalancing supply and demand in Europe. Should we expect more substantial actions like plant closures similar to North America last year?

A: Mike Smith stated they are curtailing a single line in European market to balance supply and demand.

Q: Peter Galbo asked if the flat to down gross margin comment applies to third quarter. Bernadette Madarieta said it's for the second half, with mix impact from chain business and private label shift.

Q: Robert Moskow asked about reopening North America capacity. Mike Smith said utilization rates got too high, restarting lines improves run rates and OEEs with no cost drag.

Q: Max Gumport asked what could push to lower end of adjusted EBITDA. Mike Smith mentioned ongoing competitive environment, soft traffic, and international market dynamics.

Q: Scott Marks asked about price mix in North America and international capacity. Mike Smith and Bernadette Madarieta discussed price mix components and rationalization of international capacity.

Q: Marc Torrente asked about volume growth visibility and traffic trends. Bernadette Madarieta and Mike Smith discussed volume outlook and continued soft traffic.

Q: William Reuter asked about capital allocation with stock down. Bernadette Madarieta said capital allocation priorities remain consistent with investing in business and returning cash to shareholders.