Lamb Weston Holdings, Inc. (NYSE:LW) Q2 2023 Earnings Call Transcript

Adam Samuelson : Okay. And maybe just a final, if I could squeeze in. Of your total price/mix in the quarter, how much was mix? Can you share if you can — or any reframing?

Bernadette Madarieta : Yeah. We don’t break the out mix from price, Adam. It’s predominantly price.

Adam Samuelson : All right. Okay, I just try. I appreciate all the color. I’ll pass it on. Thanks.

Operator: Our next question will come from William Reuter from Bank of America. Please go ahead.

William Michael : Hi. I just have two. Given the changes in your sourcing from the West Coast to the East Coast that you did last year now again this year, do you anticipate that in future years, if we return to more typical yields, you’ll be able to shift that back to the West Coast and therefore, there should be some kind of margin expansion in 2024 and beyond?

Tom Werner : Yes. I expect next year’s crop to be normalized and then yields good and all the things that we’re historically used to. And in terms of is that going to provide margin expansion? No, it won’t. Materially, it won’t. We’re going to have inflation in our commodity costs next year. Again, I believe based on how the commodity markets are shaping up. And as I stated in the prepared remarks, where the potato crop negotiations, we settled with Pacific Northwest, you’re going to be up 20% next year. And you stack that up over two years, that’s a big lift. And it’s going to be another difficult year, and we’ll continue to adjust our thinking on pricing that through the market going forward, but it’s not going to be material margin impact year-over-year just based on sourcing out of the East Coast.

William Michael : Got it. And then my second is based upon your guidance, even pro forma for the acquisition of the rest of the joint venture, you’re still going to be below your leverage target of 3.5 to 4 times, you’re going to be, I think, in the high twos. I guess what is that, I mean, in terms of capital allocation. I know you increased the dividend, but how are you thinking about that?

Bernadette Madarieta : Yeah. No, we’re excited about increasing the dividend based on our performance. As we think about capital allocation, we have not changed our priorities in terms of investing in the business for the long term. M&A, if there’s M&A that’s available and then we will reward our shareholders as well. But certainly, we’re going to invest in the business first.

William Michael : Okay. So the leverage target remains at 3.5 to 4 times?

Bernadette Madarieta : It does remain in that range. And as we’ve said before, we’re doing that because we want to make sure that we have enough financial firepower for M&A or other items that may come up.

William Michael : Got it. All right. That’s all for me. Thank you.