Lamb Weston Holdings, the US potato products manufacturer, has become the latest company to pull its annual guidance amid the Covid-19 crisis.
The company has withdrawn its forecasts for net sales growth and adjusted EBITDA including unconsolidated joint ventures, insisting it “does not believe it can reasonably forecast frozen potato product demand in the near term”.
Lamb Weston pointed to “the unpredictable near-term effect of the Covid-19 pandemic on the global economy, and more specifically, on restaurant traffic in North America and key international markets, including markets served by the company’s joint ventures”.
Tom Werner, Lamb Weston’s president and CEO, added: “While the operating environment in most of our markets during the fiscal third quarter was favorable, estimates on the COVID-19 pandemic’s effect on the global economy are uncertain. At this time, despite only two months remaining in our fiscal fourth quarter, we are unable to reasonably forecast frozen potato product demand because of the pandemic’s unpredictable near-term effect on restaurant traffic in North America and our key international markets. As a result, we’re withdrawing our financial outlook for the remainder of our fiscal year.”
“During these uncertain times, our top priorities are to ensure the health and welfare of our employees, maintain product safety, and continue to support our customers as they work to manage their supply chains and inventories. While the near-term impact of the COVID-19 pandemic on consumer demand and sales volume is likely to be material, we believe we have sufficient liquidity to manage through the uncertainty, and we remain confident in the long-term outlook for our customers and the continued growth of the global category.”
In Lamb Weston’s most recent quarter, the 13 weeks to 23 February, net sales rose 1% to US$937m.
Lamb Weston saw what Werner describe as “solid growth” from two divisions: foodservice, which services North American foodservice distributors and restaurant chains outside the top 100 North America-based restaurant chain customers; and retail, which includes sales of branded and private-label products to grocery, mass-merchant and club customers in North America.
The company’s so-called global arm – which is comprised of the top 100 North America-based restaurant chain customers as well as the company’s international business – saw sales fall.
Lamb Weston’s profitability came under pressure. Income from operations declined 16% to $163m, while adjusted EBITDA including unconsolidated joint ventures dropped 10% to $228m.
The company’s net income slid 21% to $111m.
Lamb Weston pointed to higher selling, general and administrative expenses, a rise in manufacturing costs due to input and fixed cost inflation and exchange rates.