Lamb Weston raised its forecast for full-year profit after beating quarterly estimates as the supplier of frozen potato products benefited from higher prices and easing supply chains.
Declining supply chain pressures helped the company save costs in the second quarter but a continued surge in labour and material charges prompted the frozen fries company to hike prices.
Lamb Weston, which is a major supplier to burger giant McDonald's, reported a 6% year-on-year decline in quarterly sales volumes, mainly, due to its efforts to exit some of its lower-margin business.
The company, however, raised its adjusted profit forecast to the range of $5.70 to $6.15 per share for fiscal 2024, compared with its prior expectations of $5.50 to $5.95 per share.
It reaffirmed net sales target of $6.8 billion (€6.2 billion) to $7.0 billion (€6.4 billion).
'Strong' Performance
"We view the second-quarter results and FY24 guide as strong in light of a bigger write-down than we expected for excess raw potatoes of $71m for the full year," TD Cowen analyst Robert Moskow said.
Its net sales came in at $1.73 billion (€1.58 billion) in the quarter ended 26 November, compared with analysts' average estimate of $1.70 billion (€1.55 billion), according to LSEG data.
On an adjusted basis, the company logged a profit of $1.45 per share, above LSEG estimates of $1.41 per share.
"We anticipate that the consumer and operating environment will remain generally stable through the remainder of fiscal 2024," said CEO Tom Werner.
Elsewhere, packaged food peer Conagra Brands slashed its annual sales and profit forecasts owing to a slower recovery in volumes. The company's margins fell 261 basis points to 14% in the reported quarter.
