“We remain on track to deliver our fiscal 2020 targets, reflecting our continued focus on execution and a generally favorable current operating environment. In North America, demand for frozen potato products is solid behind positive restaurant traffic trends, while manufacturing capacity remains relatively tight," says Tom Werner, president and CEO.
"In Europe, we anticipate that our joint venture’s performance will gradually improve as we put the challenges from last year’s poor potato crop behind us. While current global french fry demand is strong, we are monitoring signs of softening macroeconomic conditions. Although these conditions may temper the frozen potato category’s demand growth towards more normalized rates, we believe we are well-positioned to deliver our financial objectives for the year, and remain focused on creating value for our stakeholders over the long term,” says Werner.
Net sales increased $74.1 million to $989.0 million, up 8 percent versus the year-ago period. Volume increased 6 percent, primarily driven by growth in the company’s Global segment, and includes an approximate 1 percentage point benefit from acquisitions. Price/mix increased 2 percent due to pricing actions and favorable mix.
Income from operations rose 11 percent to $170.0 million versus the year-ago period, driven by higher sales and gross profit. Gross profit increased $18.0 million due to favorable price/mix and volume growth. This increase was partially offset by higher manufacturing costs due to inefficiencies, which were primarily driven by higher maintenance and related costs. Gross profit growth was also tempered by input cost inflation and higher depreciation expense primarily associated with the company’s french fry production line in Hermiston, Oregon, which started operating towards the end of the fourth quarter of fiscal 2019. In addition, gross profit included a $1.8 million gain related to unrealized mark-to-market adjustments and realized settlements associated with commodity hedging contracts in the current quarter, compared with a $5.6 million loss related to these items in the prior year quarter.
The increase in gross profit was partially offset by a $0.6 million increase in selling, general and administrative expenses (“SG&A”). The increase was largely driven by higher expenses related to information technology services and infrastructure, which included approximately $1 million of expense associated with designing a new enterprise resource platform system, as well as investments in the company’s sales, marketing and operating capabilities. In addition, the increase included an approximate $4 million decline in foreign exchange expense and a $1.6 million decline in advertising and promotional expenses.
EBITDA including unconsolidated joint ventures increased $20.0 million to $232.9 million, up 9 percent versus the prior year period, primarily due to growth in income from operations and an approximate $5 million incremental benefit from entering into an agreement to acquire the remaining 50.01% equity interest in the company’s joint venture (the “BSW Acquisition”), Lamb Weston BSW, LLC (“Lamb Weston BSW”), in November 2018, partially offset by lower equity method investment earnings.
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For more information: 
Shelby Stoolman
Lamb Weston
Tel: +1 208-242-5461
Email: shelby.stoolman@lambweston.com
www.lambweston.com