News Potatoes
Shareholders demand Lamb Weston reorganization
Jana Partners, who owns more than 5% of the shares of Lamb Weston, is to say the least not happy with the course the company is currently taking. This is evident from a letter sent to the board of directors. According to the investor, there is structural mismanagement that has cost at least $400 million. The course must change radically, according to the investment company.
While many potato processors - especially the Belgian ones - are excelling in their financial figures, the opposite is true for Lamb Weston. The globally operating french fry producer has been in dire straits for some time. In the past quarter of the fiscal year, the profit decreased by almost half. The company attributes this mainly to reduced consumption worldwide. As a result, a factory in the US was immediately closed.
Restructuring
The American Jana Partners completely disagrees with this. According to the investor, there is a healthy global market with a good demand for (frozen) potato products. The disappointing figures, according to him, are the result of structural financial mismanagement. The situation calls for a restructuring of the board of directors, as explained in a letter to the board. Only then can Lamb Weston show positive figures and generate profits for its shareholders.
The shareholder has been in discussions with the board members for some time to turn the tide, but without success. In anticipation of the new financial quarterly figures, he publishes a strong opinion on the operations of the American manufacturer. "The return has dramatically decreased over the last five years and 2024 was disastrous," it reads. "This tarnishes the good reputation the company has worldwide."
Interference
In October, Jana Partners began to actively interfere with the leadership of Lamb Weston. This then caused the market value on Wall Street to increase by $1 billion, which according to the company shows how much shareholders desire change. The board of directors did not want to move along with the proposed changes. Therefore, the public route is now taken and a firm stance is adopted.
"Unjustly, the board accuses the market of its own financial blunders." The list of accusations continues with: "A failing board has led to chronically misexecuting policies and an inflated cost structure. Instead of the long-awaited mea culpa and acknowledgment of the financial damage, the board has shifted the blame to the market and supported the management."
Depreciation of potatoes
Jana Partners estimates that the mismanagement has cost at least $400 million in Ebitda over the last 2.5 years. In addition, reliability has been compromised. Market share has decreased and during the previous and current financial year, a significant depreciation has occurred in the potato stock, due to misjudging the market. Hundreds of millions were - over a period of almost ten years - invested in an ERP project that still does not function properly. "This failed so spectacularly that customers did not receive any product delivered for a certain period." To top it off, the company faced quality issues, resulting in $80 million worth of products being recalled.
The list of accusations is much longer. It ranges from misuse of the CEO's own plane to the drastic decision to close an entire factory in Washington. According to Jana, the situation has become unacceptable for him and other shareholders. Therefore, he wants to pull Lamb Weston out of the slump as quickly as possible. If the board is not open to that, the only option left is to divest business segments to reduce risks and boost financial figures.
