Lamb Weston Holdings has slashed its profit targets in light of a restructuring plan that includes the permanent closure of a US factory and job cuts.
The frozen potato products supplier said in its first-quarter results announcement that the Connell facility in Washington will be shut down with immediate effect.
While Lamb Weston did not reveal the exact job numbers under threat at Connell, local media reports put the count around 375.
More broadly, Lamb Weston said it plans to eliminate about 4% of the global workforce, while also cancelling any unfilled new jobs.
The publicly-listed group is seeking to realise around $55m of pre-tax cost savings in the current fiscal 2025 period from the restructuring exercise, which also includes “temporarily curtailing production lines and schedules in North America”.
Capital expenditure will be reduced by $100m on the back of the plan that Lamb Weston estimates will result in pre-tax charges of $200-250m.
As group-wide sales dropped 1% in the quarter, mainly due to a more protracted decline in the mainstay market of North America, president and CEO Tom Werner said “restaurant traffic and frozen potato demand, relative to supply, continue to be soft, and we believe it will remain soft through the remainder of fiscal 2025”.
He explained further: “To drive operational and cost efficiencies, we are taking actions that include the permanent closure of an older, higher-cost processing facility and the temporary curtailment of certain production lines and schedules in our manufacturing network.
“Together, we expect these actions will help us better manage our factory utilisation rates and ease some of the current supply-demand imbalance in North America.”
The sales target for the full fiscal year has been kept unchanged from the figures put forward at the 2024 fourth-quarter stage in July – $6.6bn-$6.8bn.
Guidance for net income, however, was cut to a $395m-$445m range, from the previous target of $630-705m.
Diluted EPS is also now seen at $2.70 to $3.15, compared to the July estimate of $4.35 to $4.85.
On an adjusted basis, net income is projected at $600-$615m and diluted EPS at $4.15 to $4.35.
While the outlook for adjusted EBITDA still stands at $1.38bn-$1.48bn, Lamb Weston said the metric is likely to finish the year at the “low-end” of that range.
Capital expenditure will now be $100m below the $850m put forward in July,
Lamb Weston said the restructuring costs “primarily relate to the cost of contracted raw potatoes that will not be used due to production line curtailments, accelerating depreciation of assets, the write-down of inventory and long-lived assets, employee severance and other one-time termination benefits, and other costs”.
In terms of the first quarter, group sales dropped to $1.65bn. They were down 3% in North America at $1.10bn but were 4% higher for the international business at $550.4m.
Group volumes were 3% lower due to market share losses and “soft” foodservice traffic, while price/mix rose 2% on list-price increases in Europe and North America.
Net income across the Lamb Weston business fell 46% to $127m and diluted EPS dropped 45% to $0.88.
