The impact of a change in ERP system at Lamb Weston Holdings has led the US potato products group to cut its sales and profit forecasts.
The US-based business now sees its annual net sales reaching between $6.54bn and $6.6bn, compared to its previous forecast of between $6.8bn and $7bn.
Lamb Weston said the switch to a new ERP system in its third quarter hit orders. It also pointed to “soft near-term restaurant traffic and retail trends” in North America and other, unnamed, “key international markets”.
The company also cut forecasts for adjusted EBITDA, net income and adjusted net income.
Robert Moskow, food and agribusiness equity analyst at investment banking group TD Cowen, described the outlook as “not good”.
Shares in Lamb Weston closed down 20% at the end of trading in New York yesterday.
Access the most comprehensive Company Profiles
on the market, powered by GlobalData. Save hours of research. Gain competitive edge.
Company Profile – free
sample
Your download email will arrive shortly
We are confident about the
unique
quality of our Company Profiles. However, we want you to make the most
beneficial
decision for your business, so we offer a free sample that you can download by
submitting the below form
By GlobalData
The company issued the new forecasts alongside its fiscal third-quarter results.
In the period to 25 February, net sales increased 16% to $1.46bn, helped by a boost from recent M&A. However, net sales in North America fell 12% to $947.5m due to the ERP change and “soft” market trends.
Income from operations declined 16% to $224m. Net income dropped 17% to $146m.
Commenting on the results, Tom Werner, president and CEO at Lamb Weston said: “While we are disappointed with the magnitude of the ERP transition’s effect on the quarter, after implementing systems adjustments and modifying processes, we believe the impact is behind us as our order fulfillment rates have normalised”.
TD Cowen’s Moskow added: “The ERP issues we called out in our earnings preview exceeded management’s expectations and ours. Lamb Weston 3Q missed on sales and EBITDA and lowered FY24 guidance considerably.
“Management says they believe the impact is behind them and orders have normalised. However, the new sales guide implies only $1.73bn in 4Q compared to consensus of $1.84bn, implying another volume decline.”
Lamb Weston now sees its adjusted EBITDA reaching $1.48bn to $1.51bn, against its previous forecast of $1.54bn to $1.62bn.
The company is forecasting a net income of $770-$790m, versus its earlier prediction of $830-900m.
Its forecast for adjusted net income is $800-$820m, versus $830-900m previously.
