Lamb Weston Holdings, Inc. (NYSE:LW) Q1 2021 Earnings Conference Call - Final Transcript

Oct 07, 2020 • 10:00 am ET

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Lamb Weston Holdings, Inc. (NYSE:LW) Q1 2021 Earnings Conference Call - Final Transcript

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Executive
Tom Werner

been able to significantly reduce our incremental production costs and inefficiency as compared to what we incurred in the fourth quarter of fiscal 2020. We've also taken a range of steps to aggressively manage our selling, general and administrative expenses, including shutting down all travel and large meetings and deferring other discretionary expenditures and projects.

However, one project that we did not defer was implementing Phase 1 of our new enterprise resource planning system, as we believe it will be a key enabler to driving efficiencies over the long-term. We are currently evaluating options for when to begin implementing Phase 2.

Before handing the call off to Rob, let me update you on the potato crop and the pricing environment. With respect to the crop, on a preliminary basis, we believe the crop in our growing areas in the Columbia Basin, Idaho, Alberta and the Upper Midwest will be consistent with historical averages in the aggregate. Our early read on the European potato crop is that it will also be consistent with historical averages, and that's a welcome sign given the poor crops in recent years.

As usual, we'll provide our updated view of the crops yield and quality and how we expect the crop to hold up in storage when we report our second quarter results in early January.

With respect to contract discussions and pricing, we're largely through the negotiations for the domestic large chain restaurant contracts that are up for renewal this year. And in the aggregate, we have maintained stable pricing in the portfolio. For those contracts yet to be finalized, we will remain disciplined and take an approach designed to maintain and reinforce our strategic customer relationships.

Outside of these large chain restaurant contracts, on balance, domestic pricing continues to hold up well. However, we have begun to see increased competitive activity in some domestic market segments, as well as more value-oriented product segments in some international markets. As demand continues to strengthen, we expect pricing pressure in these segments will lessen.

In summary, we feel good about our performance in the quarter and how we're executing as a company. We're optimistic about the positive demand trends in the U.S. and in our key international markets, but we remain cautious due to the continued uncertainty with the current operating environment.

We're navigating through the crisis by prioritizing the health and safety of our employees, leveraging our manufacturing footprint and operational agility to make sure we service customers and aggressively controlling cost across the entire company. And finally, we're encouraged about the health of this year's crop, as well as the overall pricing stability across our portfolio.

These are challenging times, which we expect will be around for a while, but we also believe that by focusing on our strategies and our commitment to our employees and servicing our customers, we'll emerge as a stronger company.

Now, let me turn the call over to Rob.

Executive
Robert McNutt

Thanks, Tom. Good morning, everyone. As Tom noted, we believe that