Lamb Weston Holdings, Inc. (LW) is keen on boosting production capacity to fuel long-term growth. Moving along these lines, the leading global provider of value-added frozen potato products unveiled expansion plans for french fry processing capacity in Argentina with the construction of a new manufacturing unit in Mar del Plata, Buenos Aires.
Management highlighted that it recently increased its stake in Lamb Weston Alimentos Modernos S.A., the South American joint venture, from 50 to 90 percent.
We note that the facility is likely to manufacture more than 200 million pounds of frozen French fries and other potato items annually in the 2-billion-pound South American market. Management expects to conclude the facility’s construction by the middle of 2024. Lamb Weston anticipates the total investment to be nearly $240 million. Management noted that the investment would add to the existing capacity produced at the joint venture’s production unit in Munro, Buenos Aires.
Lamb Weston’s plans to build a new french fry processing unit bodes well amid the growing global market for frozen French fries. The Zacks Rank #3 (Hold) stock has gained 14.2 percent in the past three months against the industry’s 0.1 percent decline.
Expansion Efforts On Track
Lamb Weston’s sturdy balance sheet and capacity to generate cash keep it well placed to boost production capacity and fuel long-term growth. In July 2021, the company announced the expansion plan of French fry processing capacity at its existing American Falls, ID, facility — with an envisioned capacity to manufacture more than 350 million pounds of frozen French fries and other potato products annually. In March 2021, the company unveiled plans to build a new French fry processing facility in Ulanqab, Inner Mongolia, China. On its fourth-quarter fiscal 2022 earnings call, the company highlighted that it is on track with capacity expansion investments across Idaho and China.
In an earlier development, Lamb Weston completed the expansion of a facility located at Hermiston, OR, on June 18, 2019. The expansion has facilitated the addition of a new processing line for increasing the production of frozen French fries. Lamb Weston’s efforts to boost offerings and expand capacity enable the company to meet rising demand conditions for snacks and fries.
Apart from the above mentioned capacity-expansion endeavors, the company completed the acquisition of joint venture interests in Lamb Weston BSW sometime around mid-fiscal 2019. Among other moves, the company acquired Australia-based companies Ready Meals and Marvel Packers in 2019 and 2018, respectively. These buyouts have bolstered Lamb Weston’s market share in Australia.
Lamb Weston is continuing with investments to boost supply-chain, commercial and information technology operations. For the 52 weeks that ended May 29, 2022, capital expenditures (including IT expenditures) amounted to $306.4 million. For fiscal 2023, the company expects cash used for capital expenditures in the band of $475-$525 million.