The paragraph is from the Lamb Weston Third Quarter FY 2025 Earnings Call, where Debbie Hancock, the Vice President of Investor Relations, introduces the call and mentions the availability of their press release and presentation slides on their website. She notes that they will discuss forward-looking statements and advises on the risks and uncertainties associated with these predictions, with details available in their SEC filings. She also mentions that some remarks will include non-GAAP financial measures. Mike Smith, the President and CEO, then takes over, expressing his honor in leading a company known for innovation, product quality, customer relationships, and operations, and his commitment to building on these strengths to drive growth and shareholder value.

Lamb Weston's CEO, three months into the role, acknowledges the company's challenges and emphasizes the need for change to align with industry dynamics. The company has engaged AlixPartners to assist in developing a comprehensive value creation plan aimed at near and long-term growth. With a focus on customer engagement and supply chain optimization, Lamb Weston has initiated over 30 projects to streamline operations, reduce costs, and enhance performance. This includes optimizing transportation modes and managing warehouse space. These initiatives are part of a broader value creation program, complementing an existing restructuring plan projected to save $55 million in fiscal 2025 and $85 million in fiscal 2026. The CEO assures stakeholders of controlled progress in overcoming market challenges.

In the third quarter, Lamb Weston demonstrated strong performance with a 9% increase in volume, 4% rise in net sales, and 6% growth in adjusted EBITDA. Despite consumer concerns about the economy, the company improved sales visibility through strategic contract reshaping, enhancing customer engagement, and retaining existing clients while attracting new ones. Success was noted in different channels, including a partnership with a major QSR for a national rollout of frozen products and launching private label products in grocery and club channels. The company's growth is attributed to innovation and meeting evolving customer needs.

In North America, new products such as fridge-friendly fries and tots have been launched, expanding the market to customers without freezers. The retail channel now includes Onion Rings and Cheesy Potato Bites, while internationally, a new version of Frenzy Fries has been well-received. Despite a challenging demand environment, the focus remains on gaining market share and operational excellence. For the 2025 potato crop, North American contracts are nearly complete, with a planned price decline and fewer acres contracted due to demand and inventory levels. In Europe, potato prices are expected to remain flat, with contract planning ongoing. Capacity rationalization efforts, including closing a plant in Connell, Washington, have improved utilization.

The company is prepared to adjust production in response to changes in demand, anticipating these shifts will affect factory absorption in the short term. Despite uncertainty regarding new plant capacities outside the U.S., the industry is expected to maintain balance over time. The company is focused on optimizing manufacturing flexibility and meeting customer needs while driving productivity. They are committed to creating long-term value for investors, engaging regularly with shareholders, including discussions with Jana and Continental Grain. Bernadette Madarieta reports improved volume and profitability due to operational efficiencies, despite pressures on consumers and lower restaurant traffic. The company remains on track to meet its fiscal 2025 outlook, with a 4% increase in net sales compared to the previous year.

In this paragraph, the article discusses the company's volume and sales performance, noting a 9% increase in volume primarily due to recovering from prior losses and gaining new customer contracts, despite facing soft global restaurant traffic trends. Despite high French fry attachment rates, the volume growth fell slightly short of expectations. The company faced a 5% decline in price/mix compared to the previous year due to investments aimed at remaining competitive. In North America, net sales grew by 4%, with an 8% volume improvement that included recovering previous losses and acquiring new contracts, though this was partly offset by decreased restaurant traffic, particularly in quick service restaurants (QSRs). The declining QSR traffic affected overall sales, reflecting the significance of food away-from-home channels and QSRs for the company's North American business. Overall, the price/mix in North America fell by 4% due to strategic pricing decisions, with some offset from a favorable product and channel mix.

In the International segment, sales increased by 5% year-over-year, despite a decline in restaurant traffic in key markets. The sales volume rose by 12%, primarily due to recent customer contract wins and previously unfilled orders. Although price/mix decreased by 7% due to competitive pricing actions and unfavorable currency rates, on a constant currency basis, the decrease was about 4%. Adjusted EBITDA rose by $20 million to $364 million, driven by higher sales volumes, lower manufacturing costs, recent customer wins, and reduced SG&A expenses related to previous ERP transition costs and restructuring efforts. However, these gains were partially offset by a decline in adjusted gross profit due to unfavorable price/mix, and increased transportation and warehousing costs.

In the paragraph, the company reports a $16 million increase in depreciation expenses due to recent expansions in Idaho and the Netherlands. Adjusted gross profit improved from the second to third quarter, thanks to seasonal cost benefits and lower raw potato prices in North America. In the North America segment, adjusted EBITDA increased by $15 million to $301 million, driven by higher sales, lower manufacturing costs, and new customer contracts, partially offset by reduced restaurant traffic and competitive pricing. However, in the International segment, adjusted EBITDA fell by $8.5 million to $93 million due to unfavorable pricing, despite increased sales volume and reduced manufacturing costs. The company has $1.1 billion in liquidity, mostly from a revolving credit facility, and a net debt of $4.2 billion, with a leverage ratio of 3.4x. They reported $485 million in cash generated from operations in the first three quarters, an increase attributed mainly to better working capital management after an ERP transition.

The company plans to continue reducing working capital through line curtailments and downtimes, though favorable working capital trends have been mostly offset by lower income after adjusting for noncash activities. Capital expenditures by the end of the third quarter were $563 million, a decrease as expansion projects near completion. They aim for $750 million in fiscal 2025, potentially less due to Argentina expansion timelines, with a $200 million reduction planned for fiscal 2026. They remain committed to shareholder returns, with $151 million returned in the quarter, including $100 million in stock repurchases. This may lead to temporarily higher net debt to adjusted EBITDA. The company has left $458 million for further share repurchases and paid $51 million in dividends. Tariff impacts are not included in their financial outlook due to recent announcements.

The paragraph discusses the impact of a new U.S. tariff on frozen French fry imports, which exempts USMCA-compliant products from Canada. The company sources about 5% of its inputs from Canada, benefiting from the exemption, and does not expect significant financial impact for fiscal 2025 from the tariff changes. The company exports a significant portion of its volume, which may face future retaliatory tariffs. Revenue projections are between $6.35 billion and $6.45 billion, with slight growth expected in the fourth quarter. International volume is anticipated to increase due to new contracts, while North America volume may decline slightly due to lost quick-service restaurant volume and softer restaurant traffic. Overall price/mix is expected to decrease slightly.

In North America, price/mix is expected to decline due to pricing actions and reduced restaurant traffic, while internationally it should remain flat on a constant currency basis. Despite softening restaurant traffic, cost reduction and efficiency improvements are keeping the company on track to achieve its full-year guidance, with adjusted EBITDA expected to be between $1.17 billion and $1.21 billion for fiscal 2025. However, adjusted gross margins are projected to decline by about 700 basis points due to seasonal trends and higher factory burden absorption resulting from curtailed production. This reflects efforts to manage inventory levels amid softer demand.

In the paragraph, the company outlines its financial expectations and restructuring progress. They anticipate that the costs will outweigh the manufacturing efficiencies from recent restructuring. The adjusted SG&A forecast has been revised down to $665-$675 million, reflecting a $20-$30 million rise from Q3 to Q4, mainly due to compensation, outside adviser services, and royalty expenses. They're aiming for a full-year tax rate of about 28%, with a mid- to high-teen rate for Q4. The restructuring is on track to save at least $55 million in fiscal 2025, with savings split between reduced SG&A and cost of goods sold. Mike Smith emphasizes their focus on customers, product quality, and cost optimization to enhance profitability and shareholder value, and they plan to provide more financial details soon. He also thanks the team for their efforts during the transition. The paragraph ends with an invitation for questions from Andrew Lazar of Barclays.

In the paragraph, Andrew Lazar asks Mike Smith about the impact of various factors such as lower crop prices, weak restaurant traffic trends, and increased industry capacity on QSR contract negotiations. Mike Smith responds by saying that contract negotiations haven't started yet and will begin in the summer. He also notes that while crop prices might be down, other inflationary pressures are affecting costs. Additionally, potential effects from global tariffs could influence these negotiations. Bernadette Madarieta adds that raw potatoes make up about a third of their cost of goods, while other ingredients and overhead expenses, which are experiencing inflation, make up the rest. Andrew briefly mentions an agreement with AlixPartners at the end.

The paragraph discusses the company's approach to identifying and capitalizing on opportunities for growth and efficiency. Mike Smith explains that they are pursuing two complementary strategies: a value creation plan and a long-term growth strategy. The value creation plan focuses on managing costs across various aspects of the business, including manufacturing, logistics, and procurement, while also driving top-line sales growth and managing working capital. The long-term strategy involves a data-driven approach to identifying opportunities for future success. Additionally, Thomas Palmer from Citi asks about the factors affecting the company's gross margin, specifically the increased impact of higher fixed cost absorption in the fourth quarter and a total expected decline in gross margin of around 700 basis points.

In this paragraph, Bernadette Madarieta explains the cost implications of inventory production, noting that the third quarter inventory largely came from second-quarter production when there were only two months of curtailed production lines. The associated costs for the fourth quarter pertain to a three-month period of reduced production, leading to higher costs per pound due to fixed factory burdens. She also mentions that, besides these primary cost drivers, there are miscellaneous cost increases which are minor. Thomas Palmer then inquires about the status of excess inventory and when improvements might be expected, to which Mike Smith is expected to respond.

The teams are prioritizing inventory management as part of their value creation efforts. They are focused on reducing excess inventory through sales strategies and production adjustments. Bernadette Madarieta mentions that they aim to reduce inventory to about 65 days by year-end, but still plan to improve further through their value creation plan. Kenneth Goldman from JPMorgan questions the potential pressure on earnings per share (EPS) in the fourth quarter, noting a potential drop-off. Madarieta responds that there's no additional conservatism in their guidance, and attributes challenges partly to soft restaurant traffic.

In the paragraph, Mike Smith discusses the company's strategy with Kenneth Goldman regarding their collaboration with AlixPartners. He confirms that all options for value creation are being considered, focusing on improving the company's fundamentals across the entire profit and loss statement. Although they are considering various markets and strategies, the main effort is directed towards enhancing the top and bottom line efficiency. The goal is to realign the business for excellent execution to benefit both customers and shareholders. The conversation then shifts to the next question from Yasmine Deswandhy of Bank of America.

In the discussion, Yasmine Deswandhy inquires about the impact of acreage reductions in the Columbia Basin, attributing it to the closure of the Connell plant and market demand projections for the next 12 to 18 months. Mike Smith responds by confirming that they have reduced acreage due to weak demand and high inventories that need to be managed, as well as not needing as much raw material this year. Deswandhy also asks about pricing declines and their impact on profits, to which Smith notes the presence of other inflationary factors and mentions upcoming customer contract negotiations. Robert Moskow raises concerns about the potential sale of the Connell plant, speculating that its continued operation by another party could affect capacity utilization.

In the paragraph, Mike Smith discusses the company's strategic review of their business, including considering the sale of their Connell, Washington building, which they ultimately decided against. He mentions that some competitors have faced delays in new facility openings and production expansions, with some taking extended downtime or reducing output. In response to Max Gumport's question about weakening Quick Service Restaurant (QSR) traffic, Smith attributes a 4% decline in burger QSR traffic to consumer uncertainty stemming from macroeconomic factors.

In the paragraph, Mike Smith and Bernadette Madarieta discuss their company's strategic approach to handling demand fluctuations by considering raw material sourcing and facility downtime. Smith highlights the progress of their turnaround plan, emphasizing an unbiased, data-driven evaluation of operations to improve performance. He appreciates the proactive involvement of advisors and the leadership team in the process. When questioned by Alexia Howard, Smith mentions the ongoing work as "early innings" and notes potential issues within U.S. burger chains, speculating on factors like low-income consumer struggles, reduced high-income consumer traffic, or the impact of GLP-1 drugs.

The paragraph is a discussion between Mike Smith and Matthew Smith, with Bernadette Madarieta providing additional insights. Mike acknowledges that they do not have a clear understanding of the reasons behind certain trends, but notes that French fry orders at quick-service restaurants (QSRs) have remained strong post-pandemic. Matthew highlights stronger-than-expected North American volume in the third quarter and mentions a predicted slight decline in the fourth quarter. Bernadette explains that the third-quarter volume was boosted by increases in small regional and retail volumes due to the ERP transition from the previous year. However, this gain is expected to be countered by lost customers in the fourth quarter. Despite this, they have a pipeline of potential QSR volume increases for the following year, which will be discussed further in future guidance.

In the article paragraph, Mike Smith discusses Lamb Weston's commitment to enhancing their customer-first approach. He mentions efforts to improve continuity and assured supply for customers while highlighting progress in fill rates. When asked about the company’s EBITDA margin goal of 19% to 20%, Smith says they aren't ready to discuss it but promise future updates. Marc Torrente from Wells Fargo Securities then queries about the pricing stability in North America and international pricing trends. Smith acknowledges additional announcements since last quarter but doesn’t provide specific details.

The paragraph discusses the challenges and strategies related to capital expenditure and business operations in a specific industry facing macroeconomic pressures and soft demand. Bernadette Madarieta outlines the components of their capital spending, which include maintenance, modernization, and environmental expenditures. Carla Casella from JPMorgan inquires about changes in operations and competitive threats in the QSR (Quick Service Restaurant) sector, to which Mike Smith responds by emphasizing adjustments to their contract schedules and the openness of customers to new ideas and innovations in order to drive restaurant traffic.

The paragraph is part of a conference call wrap-up. The operator notes that there are no more questions, and Debbie Hancock thanks the participants for joining. She mentions that a replay of the call will be available on their website later. The conference then concludes, and participants are thanked again before being allowed to disconnect.

This summary was generated with AI and may contain some inaccuracies.