Lamb Weston raises dividends, suggests an expansion is coming

Lamb Weston Inc., the Northwest potato giant with a substantial Mid-Columbia footprint, reported significant revenue growth in a quarterly report released in early January. 

It also suggested it could be on the cusp of announcing a new production facility.  

Eagle, Idaho-based Lamb Weston (NYSE: LW) reported net income of $140.4 million on more than $1 billion in revenue in the second quarter of its 2020 fiscal year, which ended Nov. 24. Revenue grew by 12 percent, earnings by 18 percent relative to 2019, the company said this month. 

It attributed the increase to growth in its global and restaurant service segments. 

Lamb Weston has long been a pillar of the Mid-Columbia. 

That only accelerated in 2016, when it spun out from Chicago-based ConAgra Foods as an independent, publicly-traded company with headquarters in the Northwest. 

It is one of the largest buyers of Washington-grown potatoes and employs thousands in the Mid-Columbia at production plants, a research center in Richland and at its corporate offices in Kennewick.  

It has reliably paid dividends to investors since it became an independent company and the latest quarter is no different.  

The company announced it will increase its quarterly dividend by 15 percent, to 23 cents per share, payable on Feb. 28. In all, it said it will return $72 million to shareholders in the first half of fiscal 2020.  

It also will continue to buy its own shares through its stock buyback program.  

The company said it is building market share in South America, where it has less than 2 percent of the french fry market, through a $17 million agreement to buy a 50-percent interest in an Argentinian frozen potato plant. 

It also appears poised to expand capacity in North America as well, which could be tantalizing news for the Mid-Columbia. 

Chief Executive Officer Tom Werner said he wasn’t prepared to announce a new production facility but indicated it will happen during a Jan. 3 earnings call with analysts. 

He said the company is aggressively looking to expand capacity in and outside of North America and would share expansion plans soon. 

A new plant or production line would be a significant addition to any community. 

Lamb Weston has added three french fry production lines since 2014. It invested $200 million to add a french fry line at its Richland campus, and, more recently, $250 million to expand in Hermiston. 

Werner said the company is well positioned to meet its goals for fiscal 2020 after taking steps to secure the raw potatoes it needs to produce frozen french fries.  

The company said it is currently not affected by potato shortages in North America and Europe due to weather and other issues.  

Washington and Idaho are apparently not affected by the shortages affecting the Midwest and portions of Canada. 

“It’s really a little bit early to speculate on what’s going to happen. We have an idea. But the most important thing for us is – we got ahead of it,” Werner told analysts. 

Lamb Weston conservatively projects year-end revenue will increase 7 percent in fiscal 2020. 

Investors reacted favorably to its strong earnings report. Its share price rose more than 11 percent on the news, to nearly $94 per share on Jan. 3.

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