Lamb Weston Holdings, Inc. Common Stock

Q2 2022 Earnings Conference Call


spk_0: empower that to begin
spk_1: good day and welcome to the lamb western second quarter toy twenty two earnings conference call today's coverage is being recorded at this time of the to turn the carpet over to mr dexter conboy pp investor relations of my list and please go ahead
spk_2: good morning you for joining us from i was his second quarter twenty two earnings call this morning we should are urged press release which is available on our website land western doctor please note that during our remarks will make some forward looking statements about the company's expected performance these statements are based on how we see things today actual results may differ materially due to risks and uncertainties please refer to the cautionary statements and risk factors contain in our fcc families for more details on are forward looking statements dumb of today's remarks you could not get financial measures these non gaap financial measures should not be considered a replacement for as should be read together with i gap results you can find the gap to non gap reconciliation in are ready to release with me today or time werner our president and chief executive officer and bernadette adrianna or chief financial officer tom provide some comments are performance as was an overview of the current operating environment bernadette with them provide details on our second quarter results and updated fiscal twenty twenty two hours with that them after the call over the top think cheshire good morning and thank you for joining our call today are pleased with the improvement in our manufacturing and supply chain operations as well the progress in our financial performance in the quarter and i'm proud of l i lesson team has been able navigate through this difficult macro environment we generated strong sales a solid man across our food away from home channels draw volume growth and the initial benefits of our recent pricing actions began to offset said inflationary pressures in addition our efforts to stabilize or manufacturing operations are on track including increasing serving and processing plants improve production run rate and throughput together or sales and operating momentum drove secure job gross margin improvement in the quarter and have as well positioned to better manage the upcoming cost pressures from this year's exceptionally poor potato crop in the pacific northwest while our operations and financial results are not yet where we want them to be we're on track to deliver our financial targets for the year and our investments in capacity and productivity will get as well positioned to deliver higher margins and sustainable growth over the long term a former that gets into some of the specifics of our second quarter results and outlook let's briefly read review the current operating environment starting with demand in the u s overall fried a man and restaurant traffic in the quarter remain solid especially a quick service restaurants where demand has continued to be strong in above pre pandemic levels traffic at full service restaurants are in the quarter was also solid but remain below pre pandemic levels restaurant traffic though has softened recently as the spread of covert barry and september consumer demand for on premise tiny and as restaurants close temporarily do staff shortages while we expect a covert way will continue to temper demand for on premise dining in the near term we do not anticipate that it will have a meaningful fact on traffic or to manage us ours demand at night commercial outlets also approved or in the quarter but continued to be below prevent them at levels as with on premise dining respect of spread of covert variants will affect near term demand the for i attach bit rate in the us which is the rate at which consumers order fries when visiting a restaurant or other food service outlets continued to be above pre pandemic levels
spk_3: the served to support our out of home for i demand in the quarter
spk_2: the increase in the as bright as had rate has been fairly consistent since the beginning of the pandemic and we do not see that changing in the near term
spk_3: a man and us retail channels and a quarter was a mid teens from pre pandemic levels and we anticipate a will remain strong in the near term as a pandemic continues to fact demand and out of home channels
spk_2: now outside us the man in asia and oceania has been solid although the lack of shipping containers and disruptions to ocean freight networks continues to hinder our ability to fully serve our customers in these markets the man in europe which is survivor lamb west in my or joint venture has also been solid although consumer reaction and the effect of recently impose government lockdowns may reverse of of the recovery and restaurant traffic and fried man in the near term so overall were encouraged by the resiliency of demand and a long term trends for the category but expected there will be some near term softness with another covert wave in the us and our key international markets with respect to pricing were making good progress in implementing recent pricing actions to manage input costs inflation in the second quarter we began to see the initial benefits of the price increases that took effect in the summer and our food service and retail segments as well as in some of our international businesses we expect the benefit of these prices will continue to build as a year progresses in december we begin implementing another round of pricey actions and our food service retail segments while these actions did not affect our second quarter results will see a gradual benefit from them over the next six months in our whole segment we saw some benefit of rising actions in the second quarter but expect to see a greater impact during the back half a year this reflects price increases related to contact contractor nils as well as to benefit the price escalators for most of the global contracts that are out of for know this year we expect these price increases across our business segments will an aggregate mitigate much but not all of our cause inflation pressures we will continue to assess the pace and scope of further cause inflation and we may take for the price actions as a year progresses with respect to costs input cost inflation remains a primary driver to the increase in our costs per pound and the core comedy in transportation costs reach a double digits and respect that trend will continue to physical twenty twenty two especially as a raw potato costs significantly increase in the second half of the year outside of course inflation were making good progress to stabilize or supply chain in order to and from cause production run rates and throughput we take taken action to simplify fire manufacturing processes a drive saving through a series of productivity this is eliminating underperforming scuse and increasing potato utilization rate
spk_3: importantly after making changes our we stop production crew compensation and other incentives we steadily reduced our staff and shortfall we're working to continue his positive trend but realize as difficult as a very challenging labour environment
spk_2: depending implementation of government mandated carbon testing and vaccine regulations may also slow progress and that of our suppliers in attracting and retaining workers in the near term now turning doesn't drop the yields a quality of the potato crops in our primary growing regions and the columbia base in idaho and alberta or well below average do the extreme heat over the summer similar to pry years we had contracted with farmers to purchase potato to meet our production needs assuming an average crop year but because of the extreme heat the contract heard acres yield of your potatoes and the quality is also poor as a result or purchasing erm remaining potato needs in the open market to meet our production forecast we were able to reduce the number potatoes would otherwise have been required to purchase in the open market by successfully partnering with our customers as secure changes to proud specifications given that raw potato supply supplies time and it for i demand is large you recovered
spk_3: leave in purchasing open potato that a premium to contract a potato prices when possible we've been securing them from are nearby growing regions but we have also transport of titles from the mid west and east or north america which results in entries transportation costs were included an estimate of these additional costs and or up
spk_2: updated earnings outlook
spk_3: will begin to see more the financial impact of this year's poor crop including the high costs of open market potatoes and our third quarter results
spk_2: so in summary we feel good about our financial and operating progress in the quarter the overall demand environment and solid that may soften in the near term due to another covert wave and we're going to write pricing and operating levers to manage through this challenging environment
spk_4: let me now turn the goal over the bar that to review the details of her second quarter results and updated physical twenty twenty two outlook thanks tom and good morning everyone and tom discussed were pleased with our progress in the quarter regenerated strong sale and solid demand a craft a restaurant and service channels in north america jump volume growth and we implemented pricing action we believe our pricing and pop mitigation action have a position to navigate through this difficult operating environment and to support sustainable profitable grow over the long term
spk_5: typically in the quarter sales increased twelve percent to a little over one billion dollars this is only the fourth time and lamb western history that we tapped one billion dollars in sales and a quarter
spk_4: they'll biomes were at six percent volume growth was driven by our food service segment which reflects the continued year over year recovery and on premise dining and by strong shipments to are large chain restaurant customers in north america said is served by or global segment phil collins of branded products and a retail segment were also up in the quarter but the segments overall volume decline due primarily to lower shipments of private label products
spk_5: while our overall volume growth in the border was strong it was tempered by industrywide upstream and downstream supply chain constraints including delays and the availability of spare parts edible oil and other key material to our factories as well as labor shortages which impacted production run rates and throughput at our processing plants
spk_4: in our global segment volume growth was also tempered by the limited availability of shipping containers and disruption that ports and an ocean freight networks we expect these production and logistic challenges as well as the near term impact of covert variants to limit or volume growth through at least the end of fiscal twenty twenty two
spk_5: price mix with up six percent as we realized benefits from our previously announced pricing action and each of our for segments as a reminder we begin implementing product pricing actions in the first quarter as the primary lever to offset inflationary cost pressures and it generally takes the
spk_4: couple of quarters before these actions are fully realized in the marketplace we've also taken action to more frequently changed the freight rates that we charge to customers so they better reflect market rates historically we only adjusted these rates once or twice a year most of the increase in price makes in the quarter reflects the product and freight pricing action with favorable next providing only a modest benefit gross profit and a quarter declined eighteen million dollars of the benefit of increase sales was more than offset by higher manufacturing and transportation costs on a per pound basis
spk_5: double digit inflation for commodities and transportation costs accounted for almost ninety percent of the increase in cost per pound
spk_4: of the to commodity the played a bigger role and were again led by edible oil including canola oil which nearly doubled first the prior year quarter
spk_5: ingredients such as wheaton starches used to make batter and other coding and containerboard and plastic film for packaging
spk_4: great costs rose especially for ocean free and trucking of global logistics networks continued to struggle our costs also increase due to an unfavorable next of higher costs trucking first israel in order to meet service obligation for certain for certain customers if tom mentioned we also encouraged higher cost per pound versus the prior year due to incremental costs and inefficiency driven by lower production run rate and throughput at or factory which resulted in fewer pounds to cover fixed overhead last production days and unplanned down times were primarily due to labour shortages across our manufacturing network including covert related absenteeism
spk_5: while the cost drivers in the first two quarters of the year have been largely consistent in the second quarter we began to realize the initial benefits of the pricing and cost mitigation actions that we discussed during or laughed earning power as a result of these efforts gross margin increase sequence really is the first quarter by five hundred basis points to more than twenty percent while pricing actions provided the larger lift to the sequential improvement to gross margin or production run rate and throughput improve sequentially primarily due to our efforts to stabilize factory labor while still lower than average labour retention rates and proof modestly first is the first quarter and the number of new applicants has been steady with more stability we in turn job more factory throughput finally our actions to optimize our portfolio are also providing benefit we've eliminated underperforming scuse to simplify our portfolio and increase through put in our factories we've also successfully partnered with are large customers to secure changes to products that the case and to mitigate a portion of the operating impact of the poor quality of the fears potato crop
spk_6: in short while are run race and class structure or not yet where we want them to be we look forward to building on the notable sequential progress that mean made and the quarter and believe that we positioned ourselves to managed through this challenging near term increase class and poor potato crop
spk_4: environment moving on from cost of sale or eschew may increase seven million dollars in the quarter largely due to a couple of factors first it reflects fire labor benefit car and fire sale commission associated with increased sales volumes
spk_5: second it includes a two and a half million dollar increase in advertising and promotional expensive as we stepped up support for a retail products while these expenses are up compared with the prior year they are still below pre pandemic level
spk_4: the increase in sc ne with partially offset by a reduction in consulting expenses associated with improving our commercial and supply chain operation as those consulting projects and it as well have fewer expenses in the current quarter related to the design of a new enterprise resource planning system we had approximately two million dollars to be p related expenses in the quarter which consisted primarily of consulting expenses that's down from about five million dollars of similar type expenses in the prior year quarter we're resuming our efforts in the second half of fiscal twenty twenty two to design the next phase of our new earpiece system deluded earnings per share in the border was twenty two sent down forty four cents about twenty eight percent of the decline was related to costs associated with the redemption and right off of previously unamortized debt issuance costs related to the senior know that were originally issued in connection with our spinoff from con agra in november two thousand and sixteen we identified these costs and item impacting compare ability and are non gaap result
spk_5: excluding the impact of these items adjusted deluded apia with fifty cents which is down sixteen cents due to lower income from operation and equity method earnings moving to our segments
spk_4: bill for global segment where up nine percent in the quarter price next was up five percent reflecting a balance of higher prices charged for freight pricing actions associated with customer contract renewal and inflation driven price escalators
spk_5: volume was up four percent higher shipments to large chain restaurant customers in north america drove the volume increases while logistics constraints temper or international shipments
spk_4: overall the global segments total shipments continued to trend above pre pandemic level locals product contribution margin which is gross profit plus a impute fences decline thirteen percent to eighty one million dollars
spk_5: fire manufacturing and distribution costs per pound more than offset the benefit of favorable price max and higher sales volumes
spk_4: moving to our food service segment sales increase thirty percent with volume up twenty two percent and price mix up eight percent the ongoing recovery and demand from small and regional restaurant chains and independently owned restaurants as well as from non commercial customers drove the increased and fail volume the initial benefits of product and freight pricing actions that we begin implementing earlier that the school year as well as favorable mix drove the increase in price smith
spk_5: food services product contribution march and bros nineteen percent to one hundred four million dollars as favorable price mix and higher sales volumes
spk_4: more than offset higher manufacturing and distribution costs per pound moving to our retail segment failed increase one person
spk_5: price next increase five percent reflecting the initial benefits of pricing actions and are branded portfolio higher prices charged for free and improved mix
spk_4: field by i'm the kind of four percent as an increase in branded products are you with more than offset by lower shipments of private label products resulting from incremental losses of certain low margin business
spk_5: rachel shipments in the quarter were also tempered by the industry wide supply chain constraints and production disruption that i discussed earlier
spk_4: retail product contribution margin decline twenty nine percent to twenty one million dollars tire manufacturing and distribution costs per pound a two million dollar increase in a impute senses and lower sales volume stroke the decline moving to our liquidity position and cash flow or liquidity position remains strong we ended the first half of fiscal twenty twenty two with almost six hundred twenty five million dollars of cash and one billion dollars of availability on our undrawn revolver in the earth cat we generated more than two hundred five million dollars of cash from operation that's down about one hundred ten million dollars versus the first half of the prior year due primarily to the lower earning during the first half of the year we spent nearly one hundred fifty million dollars in capital expenditures as we continued construction of our chopped informed expansion in american falls idaho and our new processing lines and american fault and china we continue to put significant effort into managing certain material equipment and labour availability issue to keep our capital projects on track in the first half of the year we returned one hundred forty five million dollars to shareholders including nearly seventy million and dividends and seventy six million of share repurchases this includes fifty million dollars of share repurchases in the second quarter alone last month we announced a four percent increase on our quarterly dividend rate which equates to approximately one hundred forty four million dollars annually
spk_5: and a two hundred fifty million dollar increase to our current share repurchase plan reflecting our confidence in the long term potential of our business
spk_4: as a result we have about three hundred forty four million dollars authorized for share repurchases under the updated plan as i referenced earlier during the quarter we redeemed and issued nearly one point seven billion dollars of senior know in doing so our average debt maturity increased from four years to more than seven years and we reduced our annual interest expense by approximately eight and a half million dollars we remain committed to our capital allocation priorities
spk_5: first to reinvest in our business both organically and with the money and then to return free cash flow to shareholders through a combination of dividends and share repurchases over time now turning to our updated outlook
spk_4: we continue to expect or full year sales growth and fiscal twenty twenty two to be above our long term target of low to mid single digits in the third quarter we anticipate price mix will be up sequentially versus the six percent increase that we delivered in the second quarter as the benefit of previously announced product pricing action and each of our for segments continues to build we expect volume growth in the third quarter will be celery the quenched only versus the six percent we delivered and second quarter as a result of the near term impact of covert variants on restaurant traffic and a man the macro industry supply chain constraints and labour challenges that will continue to affect production run rate them through put in our factory and global logistics disruption and container shortages that affect both domestic and exports shipments we expect further deceleration in the fourth quarter as we begin to lap some of the higher volume from paris and from the prior year
spk_5: with respect to earning we continue to expect net income and adjusted ebitda including joint ventures will be pressured to fiscal twenty twenty two reflecting significantly higher potato parts and the second half of the year resulting from the poor crop double digit inflation for keep production
spk_4: and freight and higher as she and a expenses for the full year we expect our gross margin will be six hundred to seven hundred basis points below are pre pandemic margin rate of twenty five to twenty six percent implying a target range of eighteen to twenty percent that's a change from the seventeen to twenty one percent range that we provided in our previous outlook we narrowed the range for a number of reasons first we're confident about the pace and execution of the product and freight price increases that we are implementing in the market second we expect to build upon the incremental progress that we made in the second quarter to stabilize or supply chain operation and dried savings behind or cough mitigation initiative
spk_5: however we expect that the improvement in our run rate throughput and costs will continue to be gradual reflecting the broader macro challenges facing the labor market that will likely person through fiscal twenty twenty two
spk_4: am third we have greater clarity on the net cost impact from the fear exceptionally poor potato crop as a reminder will begin to realize the for financial impact of year for potato crop in the third quarter and will continue to realize it's effect through most of the second quarter of fiscal twenty twenty three below gross margin we expect our as expenses to step up to one hundred to one hundred ten million dollars in the third and fourth quarters as we begin design the second phase of our new european p project
spk_5: equity earning will likely remain pressured due to input cost inflation and higher manufacturing costs both in europe and us
spk_4: we expect our interest expense to be approximately one hundred ten million dollars excluding the fifty three million dollars of costs associated with the redemption of the senior know in the second quarter we previously estimated interest expense to be approximately one hundred fifteen million dollars our estimates for total depreciation and amortization expense of approximately one hundred ninety million dollars and effective tax rate of approximately twenty two percent and capital expenditures approximately four hundred fifty million dollars remains unchanged though in some were saying the benefit of our pricing action which drove the sequence will improvement in our top line and gross margin and a quarter
spk_2: along with our pricing actions were on track with our other cock mitigation initiative positioning up to manage to the impact of the very poor crop and finally for the full twenty twenty two we continue to expect net sales growth will be above our long term target of modem a single digits and we have enough clarity and our sales and cost outlook to narrow our previous target gross margin right now here's tom for some posting comments they worry that they were just quickly reiterate our thoughts on the quarterback say we're pleased with their progress in the quarter and were take the right steps are bracing actions and and our supply chain operations to navigate through this difficult operating environment we're on track to deliver our charge for the year
spk_7: and we believe a bad back to prepare demographic levels after we get past the impact of pure crap in the first have physical twenty twenty three and remain committed to best thing to sport wrote a great value for stakeholders over the long term
spk_1: thank you for joining us today are now ready to take your questions thank you
spk_8: you like ask a question please ignore pressing star wanted you to keep her if you're using a speakerphone pretty sure you me from she's turned off to my your signal to return equipment the begin at a store what can i ask a question pick a first question from chris grow with steve please go ahead hi good morning more grocery trip home the nice quarter there room for the second quarter here i had two questions for you our first one as gun simulation the pricing you mentioned tom that person will mitigate much of the input costs and pressure but not all of it and that's not surprising as pricey picks up here i know you also have some products but changes price for to the savings coming through
spk_3: perhaps even some lower cool because you're year or so to get a sense i i'd been all together and i'm look ahead with it's the quarter fourth quarter you know in the second half we a point where you are able to offset the majority are all of inflation
spk_2: i know there's other factors beyond pricey helping also some of the inflation yes it is a combination of everything you just said trust and respect as we progress or the back after the year
spk_3: as we said we start seeing a price realization based on the actions we have taken to this point and it you know also as we continue to ill evaluate your input costs inflation's and it you know what's going on with the the crop and the op
spk_2: and potatoes all those factors
spk_3: the commercial team or tacitly evaluating you know when he was introduced new pricey in the market so it's made a factors as you educated
spk_8: the weren't is a real time in order to have to continue to do that to the the inflationary by of and i have a right now is pretty volatile
spk_2: okay then i had another question a couple the items you've noted in the press release around production run rate switcher down and rob to utilization and not you to deepen the weeds by those are items that for her first the model and in are things that are that are unique your business i going to get a sense of like from a production run rate standpoints how much is the dollars you could even say that and and robert videos asian how much you able to utilize the potato maybe that's different from what it wasn't the past yeah you know broad strokes historically we talked about run and our factories
spk_3: to actually i'd say we're down around ten points to that right now
spk_2: the and in some weeks a little below that a cold voice even down further the team is making great progress you know bernadette had stated our staffing is improving
spk_3: although gradually and we expect you know hopefully by the spring is
spk_9: pull our staffing situation squared away but the labor market stuff and that you know and in terms of potato your days in it is ah
spk_1: historically always give users hours broad strokes we utilize about sixty two percent of obtain your to make fries
spk_10: you know what the poor drop right now is ill as down you'll find some points and that some were really washing clothes it's gonna be pretty volatile or the back half the year as we start you and up the new crop tales make fried so overly that gives you some some new range
spk_11: those yeah thank you for that the color in and and then i'll look i presume
spk_10: thank you your next from pure gambling with think of america peter and and the morning thanks hurting was awesome are you tom was wondering
spk_2: he spent a bit of time talking about manufacturing initiatives and and if you could expand the ultimate a detail bear on just what exactly you're you're doing the set yourself up in a position you know once we get beyond his cork rob what's really going to to kind of help you regain some of that profitability and i you know i know dexterous and around kind of them in some of the videos you can put out on on new automating more the plant who punches what you're doing in the plan to improve their and then also just as you start thinking about know planting for the next crop writer that between when to crop ah one where the conversations you're having with farmers are you starting earlier and more a greeting planted and any can do to help us the think about the go forward
spk_3: yeah just in terms of productivity we have a well as one initiative which is a a call it a pretty systematic savings program that we kicked off in the summer twenty twenty and we're making progress against that and as we
spk_2: i'm
spk_3: become more stable and are operating environment my expectation is that's gonna that's gonna drive
spk_2: savings that will be a parent
spk_3: as we get through more stabilize cost environment going forward and that you know rollout systematically across our network we're not all the way to bright rolling it out to all of our plants it's taken a bit more time because of the current operating environment and the focus on ensuring we get our our through throughput grades up and zapping and all that so i expect it to
spk_10: you know be more visible on our margins once operating environment stabilizes and you know with respect to the the twenty two i do draw it's early on i'm not gonna get into specifics on discussions with growers
spk_3: and you know they'll be some some news come out all talk more about a third quarter okay not that not know border and in appreciate that i guess the other just broader question on your you spend a bit of time you prepared marks talking about right i agree you know running and and a pretty healthy level we didn't even from pre pandemic and just in in in the salesforce worth conversations with with restaurant customers you know which is he really a structural change that you're seeing at this point we've heard a lot about your menu in a restaurant operators you reading their their menus and if you like that's just temporary until we get through all the watching noise across everything or or do you really feel like it's structural you know it it's really hard to say you know across a the entire menu of a restaurant what i will tell you is from outside option standpoint obviously french fries are really good category and you know the the there an important part of the raiders menu i am because of profitability so you're while there as well as simplification and we've done the same thing within our portfolio with our spew rationalization project
spk_1: i think i think the case the menus is gonna be around for awhile and eat a lot of it
spk_12: is going to have to do with the overall supply chain worldwide and food in an avid availability
spk_10: of the products the to menu at a normalize regular basis so i guess we'll be around for awhile the good news is our categories is more or less
spk_12: back to prepare them at levels and it remains is important menu driver and brava driver for our customers
spk_5: thanks very much as
spk_12: he will take an expression from palm palmer with jp morgan
spk_13: i've morning and thanks for the question
spk_12: what i wanted to ask on the the price i'm excited to he indicated in in prepared remarks price mix should continue to ramp is the are progressive i'm based on what you have secured thus far has should be think about the case of that stuff up is the biggest sequential step up as we go quarter by quarter going to be
spk_4: what we just saw in the first quarter to the second quarter or should we look for even more substantial increases aching holders as you we see pricing blow through more clearly in that global segment yeah think founders of bernadette you know we do expect price next to go up sequentially and que three from the past six percent that we reported in cute to again that's a broad a frightening action becoming more fully implemented
spk_14: darn it maybe just to clarify the the step up the we saw from one cute it to you should be something similar to that
spk_1: no
spk_15: now i wouldn't expect that large of an increase
spk_16: over again i'm and then just wanted to ask on the street surcharge have you seen that have much impact from a competitive standpoint are you see competitors take similar actions and and not is just kind of a broader industry change
spk_17: yeah i can speak to what competitors are doing that i can say from our standpoint you know we are seeing a lot of our customers switching front lane or that sort of thing so
spk_2: we continue to remain competitive great thank you
spk_3: utica next question from an and samuelson with sense
spk_4: please go ahead
spk_5: ah yes thanks argue morning everyone
spk_4: when am i so so my first question is is really neat trying to get sent back in you've updated kind of the margin framework for this year it has to eighteen to twenty percent and
spk_3: maybe it just as we think about those longer term aspirations to get back the margins back to pre pandemic level twenty five forty six percent can you help us think about kind of the key buckets of that bridge in the five to seven hundred basis points you don't have to get whether it is just much more just much more aggressive pricing
spk_2: recapturing kind of that that ten point to of capacity utilization and the benefits i would have on your on your unit cost me strength think about the by activity actions you're taking this which i think about how we walk back up to to twenty five and kind of some of the key milestones to think like element
spk_18: can you know as we think about on our tactics to getting back to the level it's gonna be important that we have an average crop your first of all and then we're gonna have to have sufficient pricing top that implied in transportation inflation
spk_2: our supply chain well as had to have stabilized and no significant impact on the man which were not anticipating sell those are going to be the key thing that are going to be important to return to that pre pandemic margin level
spk_3: and and we think that you know that's absolutely they're not supported by the solid health and the long term growth of the further the potato category that we continue to see okay enclosure the other thing on that is you know the the productivity initiative that we're rolling out and that cost saving projects were introducing in the of factories are also gonna help us hopefully bird's back to that and then some okay to clarify on the on a normal potato crop does an old hit up rob that to yields is good i'm thinking about and what your my contract of sale prices are gonna look like encounter twenty two and they're probably going to be up a lot sunstone think about
spk_16: yeah i the normal yield yeah it's a combination of a couple different things
spk_19: it's yield per acre
spk_3: and it's recovery as were ah i'm processing them in the plan on guys a raise and numbers i said earlier and you know it's you know size and quality all those guys things that the is kind of three or four factors there okay and then i just separate question he talked some your capacity utilization may be running like ten point below kind of your normal are you all to talk about underlying than a and the mechanical a returning to pre pandemic levels prevent damage you are running basically at capacity do you think a exceeded some business in some areas are just areas you think there's competitors you gain market share in areas of the market that you want to keep or is it more just a low end in retail in areas that that you can have walked away from
spk_2: me were or or manage and or darkest or portfolio at him and there's areas where
spk_20: we made some tough decisions not to serve some customers
spk_1: you know but it's a it
spk_21: you know it's it's pretty
spk_17: we have to be very near more flexible in this environment as team's doing a job that we've made some tough calls and you know in terms of the market share and all those cows things
spk_21: he i haven't seen the latest data but the the categories share
spk_17: hi so to speak really have changed that much and it as i think everybody's battle on the current operating environment and a litres best again
spk_22: okay that colors really helpful pass it on thanks the
spk_4: you think an expression from rather dickerson with jeffries great them so much first question as to clarify i'm on the guidance is you know range snared age twenty percent which is great and helpful but you also know we have a half a year round in the foyer so just as he tom i'm i'm curious to the given that range and kind of with that can imply yeah below and or the high end in the back half is still fairly wide so maybe if you could just gonna come in on you know what could be some the drivers them get you to the lower end and them like to be some the drivers their connection to choose to the hired
spk_5: not as same an adequate fallen add fell ill talk about couple me as it really smart
spk_23: guidance in the first cap you know we're already left thirteen percent as it relates to grow and and the second half we do expect prior to accelerate from the past six percent that we recorded or reported and kids you have go on a second half volume is gonna country
spk_5: need a grotto although below the six percent that we delivered in the second quarter and we talked about all the reasons for that you know as we looked at the range of guidance that we provided you know we wanted to provide and guidance as the operating environment that still remain really challenging
spk_22: and you know with the volatility in are near put near term impact pass an ongoing production disruptions in vain and that's what's going to result in whether or not we end up at the bottom more than top of the range the other c p
spk_24: that's gonna affect where we'd land in that range is going to be that storage performance of beef potatoes
spk_22: now we talked about it the and a very poor crop then and we don't know how it's going to store and that's gonna affect our potato utilization and then the other team is
spk_3: what we feel good about our cost estimates related to our open market purchases
spk_2: and we procured most of those with still are out and the during those details and so that's what's going there
spk_25: you know tempted
spk_3: a lot from one end to the other of are gross margin range that we provided okay super helpful
spk_21: and then i guess term to quickly yeah i heard you briefly before comment that kind of hoped to have some of the labor situations gonna sell corrected some time in the spring
spk_7: it would sound like girl was you know would imply that as we look forward into twenty three hopefully you're see a good position on the labour front and i tell if you ask me about the that flow through into and as an incremental costs and throughput my what are you there just any additional commentary on that would be helpful such a nice
spk_1: does your so you know like i said we made really good progress with
spk_26: staffing out in our factories in particular based on some of the actions we've taken out and they're sticky to so
spk_27: i'm
spk_28: you know
spk_27: by this and that gives me confidence based on the last couple sixty nine a trans just in terms of
spk_4: with labour fill jobs those kind of things that have that continues that we should be really good shape in the next sixty nine days
spk_13: okay super thanks so much
spk_5: thank you
spk_27: what they're going exclusive from william ruto think of america
spk_24: good morning
spk_27: on my question it sounds like the context of the december increase first is the one which was pushed through earlier this year
spk_10: it it's ah
spk_5: was relatively small i guess is that the case and to i guess i'm just wondering how much ability do you think you have for further price increases should they be needed next year yeah think that a question and you know as it relates to the price increases as a reminder it does take on either one to two quarters for that price increase to so it's result in the quarter on so that i think take a look for that and then as it relates to any future price increases you know your comment on knows other than to say we are expecting to see higher detail pass next year just given the higher cost to bro fertilizer and cetera and so on you know there could potentially the teacher right now
spk_27: okay and then just a second one for me on capital allocation your salary the share repurchases the second quarter
spk_1: also increase the dividends
spk_29: lol what are your thoughts on uses of capital given that you do have such high
spk_30: such large complex projects of the next several years in terms of share repurchases
spk_29: yeah so we have announced many expansion that we believe have attractive or time and so we will continue to have our same capital allocation policy where we're going to invest first in the business certainly as was demonstrated in the second quarter or if there are attractive returns to repurchasing more stock or we will do that
spk_31: and we just take a look at where those returns are and could potentially opportunistically take advantage of that
spk_29: and our capital allocation tired to remain the same in terms of investing in the business first followed by sharing purchases and evidence okay i'll pass the others thank you
spk_3: you think an exclusive from agents on parties
spk_2: thank you how many have been here many
spk_3: coriander of partying
spk_2: and i missed a little bit of the prepared remarks i apologize if if thomas was covered but dumb it's good to see that some of the more you know the efforts around trying to make the the pricing model around transportation or free more dynamic and industry some of that but coming through
spk_3: that was a big effort and last year where do i think you'd mentioned a one point that maybe over time that you could start to make some of the bees multiyear contract with larger customers as a reprise or come up for renewal a little bit more dynamic as well when you building in you know some some aspects of it if there is a significant volatility going forward that you be able to sort of maybe account for that a little bit more effectively and quickly then then maybe the contracts allowed for you know this this past go around and i know it you don't operate in a vacuum so this is not something that you're you and
spk_2: surely be able to do if if others didn't but i don't know how many of these contracts to be larger contract have yet really surprised and any way or come up for renewal i know more that happens more later in the spring but is there any evidence yet that any of that happened or could happen where are you really certain having maybe some of those discussion
spk_3: james worthy the environment right now just made having those are two discussions just a lot tougher have yet mandatory charisma
spk_29: yeah under as a question and you know that it's early on
spk_31: in the contract cycle this year we get more into it
spk_29: typically mid late spring or summer obviously internally wherever the conversations on with the
spk_31: with that the inflation we experienced which
spk_29: as very long time that that business of experiences type of emperor costs increases and you know potentially brought her increases
spk_32: that's something we're we're talking about and you know where it is certainly you know adjust to our customers but it's of than that that they're experiencing to and i think it's prudent for all of us to sit down and and make sure we get an environment like this that we have the proper you know a dream
spk_5: on how to navigate through this a lot better
spk_4: capone and what my last one would be i think after the first quarter
spk_33: yeah i think you are
spk_1: property helpful in and and seem very confident that that margin performance in fiscal one queue hope we would kind of represent you sort of the bottom as you well and you start to make some sequential progress moving forward to the year
spk_34: i'll be maybe not not to me in a linear fashion and that that's certainly came through right in a bigger weight and most expected in in his fiscal second quarter
spk_2: bumps and he becomes a disarray i'm sorry with the margins to dribble to say that the margin structure this quarter and similarly maybe represents a a base from which you can sequentially improve to move forward or is it
spk_35: i would necessarily spec that in lot of it depends on some of the three factors bernadette big you just mentioned which would determine where you're falling further for the for your in terms of eighteen to twenty percent range
spk_36: yeah no great question and and
spk_1: we talked a bit about the prepared remarks that we do expect to see large sequentially increase the third quarter and just seasonally bill come down a bit in the fourth quarter

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