Lamb Weston(US:LW)2024-04-04 19:58Financial Data and Key Metrics Changes - The company reported a net sales decline of $152 million or 12%, with approximately $135 million attributed to unfilled orders due to the ERP transition [24][20] - Adjusted EBITDA decreased by 2% to $344 million, impacted by an estimated $95 million from the ERP transition and a $25 million write-off of excess raw potatoes [49][29] - The company updated its full-year net sales target to $6.54 billion to $6.6 billion, down from a previous range of $6.8 billion to $7 billion [28] Business Line Data and Key Metrics Changes - North America segment sales declined by $123 million or 12%, primarily due to unfilled orders from the ERP transition [50] - International segment sales grew nearly $330 million, with $357 million from the EMEA acquisition; excluding this, net sales declined by $29 million or 16% [25] - Adjusted EBITDA for the International segment increased by 88% to $102 million, driven by the consolidation of EMEA's financial results [26] Market Data and Key Metrics Changes - Restaurant traffic growth in Europe was mixed, with increases in France, Germany, and Italy but declines in the U.K. and Spain; traffic in Asia was solid, while the Middle East saw declines [21] - Overall global French fry demand remains resilient, but current demand is at or below the historical growth rate of 2% to 4% [41] - The company noted that QSR traffic in the U.S. has been generally flat to slightly down, influenced by inflation on menus [41] Company Strategy and Development Direction - The company is focused on restoring customer order fulfillment rates to pre-transition levels and is committed to evaluating international acquisition opportunities [3][2] - The ERP transition is seen as a multiyear global rollout, with the next phase planned for North American plants [15][90] - The company remains confident in the long-term growth outlook for the fry category, expecting a return to historical growth rates as consumers adjust to higher menu prices [31][42] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges faced during the ERP transition, which significantly impacted customer orders and sales [40][20] - The company expects mid-single-digit volume declines in the fourth quarter due to ongoing soft restaurant traffic trends [57] - Management believes that the pressure on restaurant traffic is temporary and anticipates a return to growth as consumers adapt to inflation [122][121] Other Important Information - The company has maintained ample liquidity, with over $900 million available under revolving credit facilities and generated over $480 million in cash from operations [27] - Capital expenditures for the year are expected to be around $950 million, reflecting investments in new facilities and capacity expansions [30] Q&A Session Summary Question: Are there any orders that continue to be delayed? - Management confirmed that order fulfillment rates have returned to pre-transition levels [13] Question: Are customers leaning on the company more due to recent challenges? - Management indicated that communication with customers has been strong, and there has been no significant fallout from major customers [14] Question: When will clarity be achieved regarding customer relationships affected by the ERP transition? - Management expects to have clarity within the next 3 to 5 months as contracting cycles progress [71] Question: How will the company address the impact of slower restaurant traffic on volume? - Management noted that the company is actively working to regain market share and rebuild relationships with affected customers [84] Question: What is the outlook for capital expenditures in the coming years? - Management confirmed that capital expenditures will remain elevated in the near term, with ongoing evaluations based on market conditions [69]