Lamb Weston Holdings, Inc. (NYSE:LW) Q2 2018 Earnings Conference Call Transcript
Jan 04, 2018 • 10:00 am ET
Thank you, sir. (Operator Instructions) And we'll take our first question from Bryan Spillane with Bank of America.
Good morning, everybody, and Happy New Year.
Good morning, Bryan, Happy New Year.
So I had a question just back to Slide 7. And I think on that slide, in the footnote, you talk about off of the 12.7 billion pound base, that you expect the growth rate for North America in exports to be between 2% and 2.3% between, I guess, '17 and '22. Can you remind us how that forecast range compares to, I guess, what you were thinking or what you were communicating back at the Investor Day last year? Because if I remember it right, at least the North American growth rate was about 0.5%. So could you give us some context in terms of just how that's changed versus what your original expectations were when you first talked to The Street?
Right, Bryan. This is Tom. You know, we've increased our outlook, on what we think the overall category is going to grow based on really the last 12 to 18 months in North America, specifically. Our estimates are, the category has been growing between 1.5% to 2.5%, and we expect that to continue.
As you think through -- the big driver of that is the QSR space. And as that continues to improve in traffic, we expect the growth in North America to be in the 2% range. And globally, we're forecasting around 2% to 2.5% over the next four, five years.
Okay. And then, I guess, if we're looking at a -- that forecast being revised higher and then connected back to the long-term growth rate of mid- to high single-digit EBITDA growth and high single-digit EPS growth, can you just talk to, with, I guess, the sales outlook higher for the industry, how that might impact you versus your long-term algorithm, I guess, at least in the medium term?
Yes, I think -- Bryan, this is Rob. The -- again, as you would expect, as we move the top-line growth up, obviously, that's going to impact 1) investment opportunities for us, but then also going to impact the bottom line. We're still in that same range in terms of EBITDA growth, is what we're forecasting at this point.
Okay. And just one last one related to that. Just, I guess, with capacity -- with the industry over like, over a 100% capacity utilization, is that sort of having a negative effect on leverage? Are you at a point now where you're actually -- need a little bit of buffer in capacity in order to get more optimal in terms of operating leverage? I'll leave it there.
Yes, Bryan, I would say, certainly, in terms of operating leverage, as you run at the high-utilization rates that we have, you get a benefit. And I think, over the long term, as we bring our capacity online, it's going to be more balanced in terms of utilization rates