Lamb Weston Holdings, Inc. (LW) Q2 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary presents a mixed outlook. While liquidity is strong and North America shows positive trends, global challenges persist, including price/mix headwinds and flat margins. The Q&A session reveals cautious optimism but also highlights competitive pressures and macroeconomic uncertainties. The company's prudent stance on guidance and the lack of significant positive catalysts suggest a neutral sentiment, with potential for modest stock movement.
Key Financial Performance
Net Sales Second quarter net sales increased 1%, including a $24 million benefit from foreign currency translation. On a constant currency basis, net sales were essentially flat versus last year. Volume rose 8%, driven by customer wins, share gains, and strong retention, especially in North America and Asia. Price/mix declined 8% at a constant currency, primarily due to the carryover and current year impact of price and trade to support customers as well as mix shifts towards lower-margin sales.
North America Net Sales Net sales were essentially flat compared with the prior year. Volume increased 8%, supported by recent customer contract wins and share gains. Price/mix declined 8%, reflecting the carryover and current year impact of price and trade to support our customers and unfavorable mix.
International Net Sales Net sales increased 4%, including a favorable foreign currency impact of $23 million. At constant currency rates, net sales declined 1%. Volume grew 7%, while price/mix at constant currency declined 8%, primarily due to pricing actions in key international markets to support customers and unfavorable mix.
Adjusted EBITDA Adjusted EBITDA declined $9 million compared to last year to $286 million. Adjusted gross profit was down $16 million year-over-year, primarily due to unfavorable price mix. This was partially offset by higher sales volume, benefits from cost savings initiatives, and lower total manufacturing cost per pound.
North America Adjusted EBITDA Adjusted EBITDA in the North America segment increased 7% or $19 million versus the prior year quarter to $288 million. This growth reflects strong execution, including higher sales volume and lower manufacturing cost per pound, driven by raw potato deflation and benefits from cost savings initiatives. These improvements were partially offset by price and trade to support customers.
International Adjusted EBITDA Adjusted EBITDA declined $21 million to $27 million. This reflects price and trade to support customers as well as higher manufacturing cost per pound. These costs include start-up expenses associated with ramping up the new Latin America production facility in Argentina and increased factory burden and other costs in Latin America and Europe as supply and demand are rebalanced.
Free Cash Flow Free cash flow was strong at $375 million. Capital expenditures were $156 million in the first half, down $331 million from last year as major growth investments and facility expansions were completed.
Liquidity Liquidity and cash position remain strong with approximately $1.43 billion of liquidity, including $1.35 billion available under the revolving credit facility and $83 million of cash and cash equivalents. Net debt was $3.6 billion, and the adjusted EBITDA to net debt leverage ratio was 3.1x on a trailing 12-month basis.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
New Product Launches: Several new item launches in North America, leveraging Lamb Weston's history of quality, innovation, and value. Internationally, launched Snap Fries, a crispy fast fry innovation for oven preparation, with early success in airline customer expansion.
Market Expansion: Reopened previously curtailed capacity in North America to meet customer demand. Expanded production in Argentina to capture growth in Latin America, with the facility already producing and qualifying products for key customers. Leveraging global manufacturing and supply chain to capture volume in fast-growing markets like Asia and Latin America.
Cost Savings Initiatives: On track to deliver annual cost savings target. Building a global supply chain with improvements in run rates, safety, and alignment with customer metrics. Investing in tools to improve demand and supply planning.
Capital Efficiency: Capital spending reduced, with fiscal 2026 expenditures expected below $500 million. Generated $375 million in free cash flow in the first half of fiscal 2026. Repurchased $40 million of shares in Q2 and increased quarterly dividend by 3%.
Focus to Win Strategy: Strengthening customer partnerships through service, joint business planning, and menu innovation. Gained share with new and growing customers, with 90% of open contracted volume negotiations concluded. Addressing supply-demand balance globally to optimize asset utilization.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Dynamic macroeconomic and competitive environment: The company faces challenges in navigating a dynamic macroeconomic and competitive environment, particularly in international markets.
European market pressures: In Europe, a strong potato crop, softer restaurant traffic, and lower export demand due to localized production in other regions are creating pricing pressures. The European business is also less contracted, contributing to volatility.
Latin America production ramp-up: The new facility in Argentina is facing higher costs per pound due to lower production volumes during the ramp-up phase, which will persist for the remainder of the year.
International pricing and demand challenges: Internationally, restaurant traffic has declined in key markets like the U.K., and pricing actions to support customers are impacting margins.
Input cost inflation: Input costs outside of raw potato prices, such as tariffs, labor, fuel, power, water, and transportation rates, have increased, adding pressure to profitability.
Palm oil tariff uncertainty: Agreements for palm oil tariff exemptions from Indonesia and Malaysia have not been finalized, leading to continued forecasted expenses.
Underutilization in Europe: Efforts to rebalance supply and demand in Europe are leading to underutilization of assets, increasing costs.
Shift to lower-margin sales: There is a mix shift towards lower-margin sales, including restaurant customers and private label retail customers, which is impacting profitability.
Higher manufacturing costs in international markets: Manufacturing costs in international markets, including start-up expenses in Latin America and underutilization in Europe, are higher, affecting margins.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Volume Growth: The company expects continued volume growth and strong sales momentum for the balance of fiscal 2026, with North America volumes expected to grow at or above first-half rates.
Revenue Guidance: The company is on track to deliver at the high end of its sales guidance range for fiscal 2026, supported by strong demand and completed contract negotiations.
International Market Trends: International volumes in the second half are expected to be flat year-over-year, with headwinds from softer restaurant traffic, added capacity, and a strong prior-year comparison.
Price/Mix Dynamics: Price/mix is expected to remain unfavorable at constant currency in the second half, but to a lesser extent than the first half. North America price declines are expected to ease, while international markets will face continued pricing pressure.
Adjusted Gross Margin: Adjusted gross margin in the second half is expected to be flat to down compared to the first half's 20.4%, reflecting price/mix dynamics and higher manufacturing costs internationally.
Capital Expenditures: Fiscal 2026 capital expenditures are expected to come in below the $500 million target, reflecting disciplined investment and a focus on sustaining performance.
Adjusted EBITDA Guidance: The company reaffirmed its fiscal 2026 adjusted EBITDA guidance range of $1 billion to $1.2 billion, expecting to finish closer to the midpoint.
International Expansion: The company is ramping up production at its new facility in Argentina, which is expected to drive volume growth and margin expansion over the coming years.
Global Market Opportunities: The company is well-positioned to capture volume in fast-growing markets such as Asia and Latin America, with international markets projected to represent 75% of global industry volume growth through 2030.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Quarterly Dividend Increase: The Board approved a 3% increase to the quarterly dividend, continuing the company's annual dividend increase tradition since becoming a public company.
Dividend Payout: In the first half of the year, the company returned $103 million in cash dividends to shareholders.
Share Repurchase Program: The company repurchased $40 million of shares during the second quarter and $50 million year-to-date. There is $308 million remaining under the current repurchase authorization.
Capital Allocation: The company remains committed to returning cash to shareholders through dividends and share repurchases, while maintaining a strong balance sheet.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:Should we expect similar production curtailments in Europe as seen in the U.S. last year?
A:The company has restarted some previously curtailed lines in North America due to strong volume and is curtailing a single line in Europe to balance global supply and demand.
Q:Will there be a seasonal uptick in North America in Q3?
A:North America is experiencing a shift from branded to private label in retail and a higher proportion of business with multinational chain customers. Gross margins are expected to remain relatively flat in the back half of the year.
Q:What is the update on competition in Asia export markets?
A:The company is seeing strength in China and APAC, but added capacity in developing markets is pressuring exports from Europe. Despite challenges, the company remains optimistic about growth in international markets, including Latin America.
Q:Does the flat to down gross margin commentary apply to both Q3 and Q4?
A:Yes, the flat to down gross margin commentary applies to the second half of the year, with moderation in typical seasonal trends and a step-down in Q4.
Q:Is the price/mix headwind in North America moderating as expected?
A:Yes, price/mix headwinds are expected to moderate in the second half of the year, but mix impacts from shifts to private label and chain business remain pronounced.
Q:Will the mix headwind persist through next year?
A:The company will monitor trends, but the shift from branded to private label and chain customer growth is expected to persist through the balance of this year.
Q:Why did the company reopen more capacity in North America?
A:Utilization rates in North America were high, prompting the reopening of production lines to meet customer expectations. This is expected to have a net positive impact on factory burden and margins.
Q:How is the company improving execution and monitoring?
A:The company has implemented clear accountabilities, KPIs, and scorecards with the help of AlixPartners, and is investing in demand and supply planning to improve predictability and execution.
Q:What could push the company to the lower half of its adjusted EBITDA guidance?
A:Challenges include price/mix headwinds, startup costs in Argentina, and underutilization in Europe. However, North America remains strong, and the company expects to be near the midpoint of guidance.
Q:Why is the company not raising the low end of its EBITDA guidance?
A:The company is taking a prudent approach due to ongoing competitive pressures, macroeconomic headwinds, and dynamic international markets.
Q:What is the outlook for price/mix dynamics in North America?
A:Price/mix headwinds are expected to moderate slightly in the second half as fiscal '25 pricing actions are lapped. The company is focused on customer partnerships and volume growth.
Q:What is the status of international capacity additions?
A:The pace of newly announced capacity has slowed, but some capacity has been added in developing markets, impacting exports from Europe. The company expects the industry to remain rational over time.
Q:What is the volume growth outlook for the second half of the year?
A:Volume growth in North America is expected to be consistent with the first half, excluding the 53rd week. International volumes are expected to be flat year-over-year.
Q:Are there any signs of improvement in traffic trends?
A:Traffic trends remain soft, with no significant changes observed in recent data.
Q:What is the overall industry capacity for frozen products?
A:The market is expected to remain rational, with some capacity added in developing markets and delays or cancellations in other regions.
Q:Is the company paying penalties or accepting lower pricing due to past missteps?
A:No, pricing is based on competitive market conditions, and the company is focused on customer partnerships and volume growth.
Q:How will the company's leverage position affect capital allocation?
A:The company remains focused on its capital allocation strategy, including investing in the business and opportunistic share repurchases.
Q:Review of Unclear Management Responses
A:Management avoided directly addressing the potential for further EBITDA declines in 2027, instead emphasizing their strategy and ongoing improvements. They also provided limited detail on the specific impact of international capacity additions and traffic trends on future performance.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
America production
Asia
Europe rebalance
Focus
Latin America
addition
asset place
balance volume
benefit cost
carryover price
center
cost saving
crispy fry
crop restaurant
customer fill
customer partnership
dividend share
dynamic manufacturing
expenditure investment
facility Argentina
headwind
increase dividend
liquidity cash
market Latin
mix currency
mix dynamic
month period
negotiation
place priority
principle
production facility
production volume
ramp
rebalance supply
restaurant traffic
share gain
shift margin
stock repurchase
strength customer
supply chain
trade mix
utilization rate
LW Transcript
Lamb Weston Holdings, Inc. (LW) Presents at 21st Annual Global Farm to Market Conference Transcript
Neutral5-13
Lamb Weston Holdings, Inc. (LW) Q3 2026 Earnings Call Transcript
Unknown4-1
The earnings call summary and Q&A reveal mixed signals. While the company expects volume growth and strong demand in North America, international markets face pricing pressures and flat growth. The Q&A highlighted some uncertainties, such as the impact of the Middle East conflict and unclear guidance on future costs. However, the lack of additional potato write-offs and strong cost savings initiatives are positive. Overall, the mixed outlook on pricing and international challenges balance the positive aspects, leading to a neutral sentiment.
Lamb Weston Holdings, Inc. (LW) Q2 2026 Earnings Call Transcript
Unknown12-19
The earnings call summary presents a mixed outlook. While liquidity is strong and North America shows positive trends, global challenges persist, including price/mix headwinds and flat margins. The Q&A session reveals cautious optimism but also highlights competitive pressures and macroeconomic uncertainties. The company's prudent stance on guidance and the lack of significant positive catalysts suggest a neutral sentiment, with potential for modest stock movement.
Lamb Weston Holdings, Inc. (LW) Q1 2026 Earnings Call Transcript
Unknown9-30
The earnings call summary provides mixed signals. While there are positive elements such as strategic investments, cost savings, and new customer wins, there are also concerns like flat revenue guidance and inflationary pressures. The Q&A reveals uncertainties about tariff exposures and unclear management responses, which offset the positives. Without a clear market cap, the overall sentiment leans neutral, as positive elements are balanced by risks and uncertainties.
LW Slides
Lamb Weston Q3 FY2026 slides: North America surges as international lags2026-04-01
Lamb Weston Q2 2026 slides: volume growth offset by pricing pressure as stock tumbles2025-12-19
Lamb Weston Q1 2026 slides: Volume growth offsets price pressure, outlook reaffirmed2025-09-30
Lamb Weston Q4 2025 slides: Volume growth offset by pricing pressure, cost-cutting plan unveiled2025-07-23
LW Report
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
