News Potatoes
Restructuring at Lamb Weston and factory closure
The American potato giant Lamb Weston announces a major restructuring to get its financial results in order. For this purpose, it has also closed a factory in Washington. CEO Tom Werner says that disappointing demand for fries and other potato products continues to affect the company.
In the first quarter of 2025 (June, July, and August) of the fiscal year, the company achieved a revenue of $1.654 billion. At the bottom line, there is a net result of $127.4 million. Converted to €116.14 million. Revenue decreased by 1% compared to the same quarter last year. Profit decreased by 46%. These figures are in line with the company's earlier expectations.
3% less sales
According to CEO Werner, the $11.2 billion revenue decline is due to lower consumption worldwide. Both at home and in restaurants, fewer potato products are being consumed. "We believe that demand will remain 'soft' throughout fiscal year 2025 (until May 2025)," Werner explains in the context of the figures. Lamb Weston saw a 3% decrease in sales volume in the quarter.
The company had previously decided to change its strategy and position itself less as a price fighter. As a result, it sold less volume to markets focused on low prices and was able to generate more revenue at higher margins in designated growth markets. Higher inflation in North America and Europe also contributed. However, the company had to allocate $39 million for a voluntary product recall.
Potato costs
More expensive potatoes have adversely affected the company's financial results, as stated in the commentary on the figures. In North America, Lamb Weston saw its EBITDA decrease by $103.3 million, mainly due to higher raw material costs and the recall. In Europe and other markets, the result plummeted by over $39 million.
Alongside the financial figures, the company announced a restructuring plan. The doors of their factory in Connell, Washington, were immediately closed on October 1st. Lamb Weston built this factory in the seventies and mainly produced fries and wedges there. The facility processed about 400,000 tons annually. The 375 employees are being laid off.
Impact on Europe
In other North American factories, production lines will also run at a slower pace to better align production with demand. Additionally, 4% of the workforce will be laid off. The company has a total of fifteen North American processing plants, mainly in Washington, Idaho, and Oregon. The four Dutch factories are not included in these plans, as reported by the Dutch branch of Lamb Weston in a letter to their growers.
These drastic measures, along with $100 million less in investments, are expected to result in $55 million in cost savings (pre-tax) and help stabilize cash flow. In total, the company hopes to reduce costs by $200 to $250 million. Part of this amount can be achieved by purchasing fewer potatoes that are no longer needed (in North America) due to reduced production capacity.
Positive outlook
Despite the changing economic conditions and an ongoing lawsuit against the company for artificially inflating profits, it surprisingly maintains its earlier forecast for the entire fiscal year 2025. This stands at $6.6 to $6.8 billion, representing a year-on-year growth of 2% to 5%.
Niels van der Boom
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