Q1 2024 Lamb Weston Holdings Inc Earnings Call

Speaker 1: You are currently on hold for today's conference call. At this time, we are still in today's audience and plan to band away shortly. We appreciate your patience and pushing on the line.

We're currently on today's conference call at this time, we have someone today's audience and plan to pay the way. Shortly we appreciate your patience and pushing down the line.

[music].

Speaker 2: Good day and welcome to the Lamb Weston first quarter earnings call. Today's conference is being recorded. At this time, I'd like to turn the presentation over to Mr. Dexter Kongbile, VP of Investor Relations and Strategy. Please go ahead, sir.

Good day and welcome to the Lamb Weston first quarter earnings call Today's conference is being recorded.

At this time I'd like to turn the presentation over to Mr. Dexter Hung boy VP of Investor Relations and strategy. Please go ahead Sir.

Speaker 3: Good morning and thank you for joining us for Lamb Weston's first quarter 2024 earnings call. This morning we issued our earnings press release which is available on our website lambweston.com.

Good morning, and thank you for joining us for Lamb Weston as first quarter 2024 earnings call. This morning, we issued our earnings press release, which is available on our website Lamb Weston Dot com.

Speaker 3: Please note that during our remarks, we'll make some forward-looking statements about the company's expected performance that are based on how we see things today. Our results may differ materially due to risks and uncertainty.

Please note that during our remarks, we'll make some forward looking statements about the company's expected performance that are based on how we see things today actual results may differ materially due to risks and uncertainties.

Speaker 3: Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward-looking statements.

Please refer to the cautionary statements and risk factors contained in our SEC filings.

More details on our forward looking statements.

Speaker 3: Some of today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for financial measures that should be read together with our GAAP results.

Today's remarks include non-GAAP financial measures. These non-GAAP financial measures should not be considered a replacement for that should be read together with our GAAP results you can find the GAAP to non-GAAP reconciliations in our earnings release.

Speaker 3: you can find the GAAP, non-GAAP , reconciliations in our earnings release. With me today are Tom Warner, our President and Chief Executive Officer, and Bernadette Madriato, our Chief Financial Officer.

With me today are Tom Werner, our President and Chief Executive Officer.

That might be out of our Chief Financial Officer, Tom will provide an overview of the current operating environment brought on that will then provide details on our first quarter results as well as our updated outlook for fiscal 2024.

Speaker 3: Tom will provide an overview of the current operating environment. Bernadette will then provide details on our first quarter results, as well as our updated outlook for fiscal 2024.

Speaker 4: With that, let me now turn the call over to Tom. Thank you, Dexter. Good morning and thank you for joining our call today. We delivered a strong start to the year as we continue to execute on our strategies to drive sustainable, profitable growth. Our integration of our EMEA operations is progressing well. Our capacity expansion in China is now up and running. And our other expansion and modernization efforts around the globe remain on track.

With that let me now turn the call over to Tom. Thank you Sir good morning, and thank you for joining our call today, we delivered a strong start to the year as we continued to execute on our strategies to drive sustainable profitable growth.

Our integration of our EMEA operations is progressing well our capacity expansion in China is now up and running and our other expansion and modernization efforts around the globe remain on track.

Speaker 4: Our supply chain teams continue to drive productivity savings, and our commercial teams remain focused on serving our customers and driving innovation across all channels.

Our supply chain teams continue to drive productivity savings and our commercial teams remain focused on serving our customers and driving innovation across all channels.

Speaker 4: While our volume was down versus the prior year, it was in line with our expectations and was primarily driven by our decisions to exit lower priced, lower margin business. We should see our year-over-year volume trends improve as the year progresses as we begin to lap and backfill exited volumes with higher margin business.

While our volume was down versus the prior year. It was in line with our expectations and was primarily driven by our decision to exit lower priced lower margin business.

We should see our year over year volume trends improve as the year progresses, as we begin to lap and backfill exited volumes with higher margin business.

Speaker 4: Overall, we feel good about the health of the category, our first quarter financial results, and our operating momentum, and have raised our sales and earning targets for the year. Let me now turn to the...

Overall, we feel good about the health of the category, our first quarter financial results and our operating momentum and have raised our sales and earning targets for the year.

Let me now turn to the current operating environment.

Speaker 4: The global frozen potato category continues to be solid with overall demand and supply balanced. Fry attachment rates, which is a rate at which consumers order fries when visiting a restaurant or other food service outlets across our key markets have remained largely steady and above pre-pandemic level.

Global frozen potato category continues to be solid with overall demand and supply balanced fry attachment rates, which is the rate at which consumers order fries, when visiting a restaurant or other foodservice outlets across our key markets have remained largely steady and above pre pandemic levels.

Speaker 4: Restaurant traffic in our key markets was generally solid. In the US, overall restaurant traffic was flat versus the prior year quarter as QSR traffic growth offset further traffic declined in full service restaurant channels.

Restaurant traffic in our key markets was generally solid and.

In the U S. Overall restaurant traffic was flat versus the prior year quarter as <unk> traffic growth offset further traffic declines and full service restaurant channels.

Speaker 4: We believe that this is the cumulative effect of inflation and other macro pressures on the consumer over the past few years favoring QSR traffic and tempering full service and casual dining traffic.

We believe that this is the cumulative effect of inflation and other macro pressures on the consumer over the past few years favoring USR traffic and temporary and full service and casual.

Casual dining traffic.

Speaker 4: While overall traffic growth did slow sequentially from about 1% in our physical 4th quarter as quick service restaurant traffic growth cooled, much of that weakness was in June . And we're encouraged that both QSR and full service restaurant traffic trends improved as the quarter progressed.

While overall traffic growth did slow sequentially from about 1% and our physical fourth quarter as quick service restaurant traffic growth cooled much of that weakness was in June and we're encouraged that both U S are in full service restaurant traffic trends improved as the quarter progressed.

Speaker 4: In Europe , restaurant traffic grew in many of our key markets. In the UK, traffic was up mid-single digits with growth in both QSR and full-service restaurants.

In Europe restaurant traffic grew in many of our key markets in the UK traffic was up mid single digits with growth in both GSR and full service restaurants.

Speaker 4: Growth was also solid in France, Germany, Italy, and Spain.

Growth was also solid in France, Germany, Italy, and Spain.

Speaker 4: In Asia, China restaurant traffic growth was very strong, but off depressed levels as the country rebounded from severe COVID-related restrictions.

In Asia, China restaurant traffic growth was very strong, but off depressed levels as a country rebounded from the severe COVID-19 related restrictions.

Speaker 4: Traffic in Japan was solid in both QSR and full-service restaurants.

<unk> in Japan was solid in both GSR and full service restaurants.

Speaker 4: We suspect that restaurant traffic trends will be volatile in the near term as high interest rates, high inflation, and uncertainty continues to affect consumers. That said, frozen potato demand has proven resilient during the most challenging economic times and we continue to be confident in the long-term growth prospects of the global category.

We suspect that restaurant traffic trends will be volatile in the near term as high interest rates high inflation and uncertainty continues to affect consumers that said frozen potato demand has proven resilient during the most challenging economic times and we continue to be confident in the long term growth prospects of the global category.

Now with respect to costs.

Speaker 4: We continue to expect input cost inflation in the mid to high single digits, largely driven by higher contract prices for potatoes, including a 20% increase in North America and a 35 to 40% increase in Europe .

We continue to expect input cost inflation in the mid to high single digits, largely driven by higher contract prices for potatoes, including a 20% increase in North America, and a 35% to 40% increase in Europe .

Speaker 4: Much of our inflation-driven pricing across our channels has either already been announced or included in price escalators within existing contracts.

Each of our inflation driven pricing across our channels has either already been announced are included in price escalators within existing contracts.

Speaker 4: Customer contracts representing about 20% of our North American business are in the process of being finalized, and we feel good in the aggregate about the likely pricing and terms.

Customer contracts, representing about 20% of our North American business are in the process of being finalized and we feel good in the aggregate about the likely pricing and terms.

Speaker 4: Over the long term, we continue to expect pricing actions and supply chain productivity improvements will be the primary levers to offset inflation.

Over the long term, we continue to expect pricing actions and supply chain productivity improvements will be the primary levers to offset inflation well.

Speaker 4: We'll also continue to drive improvements in product and customer mix to benefit sales growth and profitability. Now, with respect to the

We will also continue to drive improvements in product and customer mix to benefit sales growth and profitability.

Now with respect to the upcoming potato crop.

Speaker 4: We are harvesting and processing the crops in our growing regions in both North America and Europe . And we believe the crops in the Columbia Basin, Idaho, Alberta, and the Midwest are in line with pre-pandemic historical averages.

We're harvesting and processing the crops in our growing regions in both North America, and Europe , and we believe the crops in the Columbia Basin, Idaho, Alberta, and the Midwest are lined with pre pandemic historical averages.

Speaker 4: In Europe , we believe that the crop will also be in line with historical averages as a result of improved growing conditions.

In Europe , we believe that the crop will also be in line with historical averages as a result of improved growing conditions.

Speaker 4: We'll provide our final assessment of the crop, including how it performs out of stores, when we report our second quarter results in early January .

We will provide our final assessment of the crop, including how it performed out of stores. When we report our second quarter results in early January January .

Speaker 4: So in summary, we delivered solid results in the first quarter and continue to have good operating momentum.

So in summary, we delivered solid results in the first quarter and continue to have good operating momentum.

Speaker 4: The overall category remains healthy with demand and supply largely balanced. And finally, at this time, we believe the potato crops in our growing regions in North America or in Europe will be in line with pre-pandemic averages. Let me now turn the call.

The overall category remains healthy with demand and supply largely balanced and finally at this time, we believe the potato crops in our growing regions in North America or in Europe will be aligned with pre pandemic averages.

Let me now turn the call over to part of that.

Speaker 5: Thanks Tom and good morning everyone. I want to start off by thanking the entire Lamb Weston team for the strong start to the year. Our performance speaks for itself and it's a testament to the passion and dedication of our entire Lamb Weston team.

Thanks, Tom and good morning, everyone I wanted to start off by thanking the entire Lamb Weston team for the strong start to the year. Our performance speaks for itself and it's a testament to the passion and dedication of our entire Lamb Weston team.

Speaker 5: We recognize that we're operating in a challenging macro environment, but the strong first quarter performance has allowed us to raise our fiscal 2024 financial targets.

We recognize that we're operating in a challenging macro environment, but the strong first quarter performance has allowed us to raise our fiscal 2024 financial targets.

Let's start with reviewing our first quarter results.

Speaker 5: Compared with the prior year, sales increased $540 million or 48% to about $1.7 billion.

Compared with the prior year sales increased $540 million or 48% to about $1 7 billion.

Speaker 5: About 375 million or 70% of the increase was attributable to the incremental sales from acquisitions, with most coming from our EMEA business.

About $375 million or 70% of the increase was attributable to the incremental sales from acquisition with most coming from our EMEA business.

Speaker 5: We lapped the Argentina acquisition this quarter, but will continue to receive the incremental benefit from the consolidation of the AMENA operations in the second and third quarters.

We lapped the Argentina acquisition this quarter, but we will continue to receive the incremental benefit from the consolidation of EMEA operations in the second and third quarters.

Speaker 5: As a reminder, since we began to consolidate EMEA sales beginning in the fourth quarter of fiscal 2023, those results are included in our last year's sales baseline.

As a reminder, since we began to consolidate EMEA sales beginning in the fourth quarter of fiscal 2023.

Those results are included in our last year sales baseline.

Speaker 5: Excluding the incremental sales from our acquisitions, net sales grew 15%.

Excluding the incremental sales from our acquisition net sales grew 15%.

Speaker 5: Price mix was up 23% as we benefited from the pricing actions taken in fiscal 2023 in both our North America and international segments to counter input and manufacturing cost inflation.

Price mix was up 23% as we benefited from the pricing actions taken in fiscal 2023, and both our North America and international segments to counter input and manufacturing cost inflation.

Speaker 5: MIX was also favorable as we continue to strategically manage our product and customer portfolio.

<unk> was also favorable as we continue to strategically manage our product and customer portfolio.

Speaker 5: In addition, we estimate the price mix in the quarter benefited by a couple percentage points from lower than expected trade spending associated with pricing actions that we began implementing in the last month of fiscal 2023.

In addition, we estimate the price mix in the quarter benefited by a couple of percentage points from lower than expected trade spending associated with pricing actions that we began implementing in the last month of fiscal 2023.

Speaker 5: This may be largely timing related and as a result could be a slight headwind as the year progresses.

This may be largely timing related and as a result could be a slight headwind as the year progresses.

Speaker 5: The trade spend benefit in the quarter, however, was mostly offset by a roughly two-point headwind related to lower freight charges passed on to customers as transportation costs have come down from the prior year period.

The trade spend benefit in the quarter, However was mostly offset by a roughly two point headwind related to lower freight charges passed onto customers as transportation cost have come down from the prior year period.

Speaker 5: As a reminder, our goal is to match freight charge to our customers with our transportation costs so that their effect on our profits is neutral over time.

As a reminder, our goal is to match freight charge to our customer with our transportation costs. So that their effect on our profits is neutral over time.

Speaker 5: In line with expectations, overall sales volumes declined 8%.

In line with expectations overall sales volumes declined 8%.

Speaker 5: The decline was primarily due to our decisions to exit volume related primarily to four of our lower priced and lower margin contracts as part of our revenue growth management initiatives. And to a lesser extent, continued inventory destocking by certain customers in international markets and in select U.S. retail channels also impacted volume.

The decline was primarily due to our decisions to exit volume related primarily to four of our lower priced and lower margin contacts as part of our revenue growth management initiatives and to a lesser extent continued inventory destocking by certain customers in international markets and in select U S.

Retail channel also impacted volume.

Speaker 5: We believe the effect of these destocking actions is largely behind us and should have little impact, if any, on our results going forward.

We believe the effect of these destocking actions is largely behind us and should have little impact if any on our results going forward.

Speaker 5: It's important to note that volume elasticity or the amount of volume lost in response to inflation-based pricing actions have been generally low. We expect our year-over-year volume trends to improve as the year progresses.

It's important to note that volume elasticity or the amount of volume lost in response to inflation based pricing actions have been generally low we expect our year over year volume trends to improve as the year progresses.

Speaker 5: as we lapped the volume we exited and backfilled volume with higher margin business.

As we lap the volume, we exited and backfill volume with higher margin business.

Speaker 5: Moving on from sales, growth profit in the quarter, excluding comparability items, increased $213 million to $490 million.

Moving on from sales gross profit in the quarter, excluding comparability items increased $213 million to $490 million near.

Speaker 5: Nearly three quarters of the increase was driven by the cumulative benefit of pricing acts They were lower in number ofrawler than if they are every 30 miles modern fine, for the total cost compared to an actual

Nearly three quarters of the increase was driven by the cumulative benefit of pricing actions the timing of trade spending mix improvement and supply chain productivity and our legacy Lamb, Weston business, which more than offset higher input and manufacturing cost per pound and the impact of lower volumes.

Speaker 5: the timing of trade spending, mixed improvement and supply chain productivity in our legacy Lamb Weston business, which more than offset higher input and manufacturing costs per pound and the impact of lower volume.

Speaker 5: The remaining roughly one quarter of the increase was attributable to incremental earnings from consolidating EMEA.

The remaining roughly one quarter of the increase was attributable to incremental earnings from consolidating EMEA.

Speaker 5: including the dilutive impact of the EMEA acquisition, our gross margin percentage, excluding comparability items, increased 480 basis points to 29.4%.

Including the dilutive impact of the EMEA acquisition, our gross margin percentage, excluding comparability items increased 480 basis points to 29, 4%.

Speaker 5: While first quarter margins have historically been our lowest margin quarter, we estimate that the timing of trade spending that I mentioned earlier accounted for approximately 200 basis points of the increase, which would put our normalized first quarter gross margin, including acquisitions, approaching 28%.

While first quarter margins have historically been our lowest margin quarter.

Estimate that the timing of trade spending that I mentioned earlier accounted for approximately 200 basis points of the increase which would put our normalized first quarter gross margin, including acquisitions approaching 28%.

Speaker 5: Input costs continued to increase mid to high single digits on a per pound basis.

Input costs continued to increase mid to high single digits on a per pound basis the.

Speaker 5: The increases were largely driven by a 20% increase in the contracted price for potatoes in North America.

The increases were largely driven by a 20% increase in the contracted price for potatoes in North America.

Speaker 5: higher prices for open market potatoes due to poor yields from the 2022 crop, and continued increases in the cost of labor, energy, and ingredients for batter coating.

Higher prices for open market potatoes, due to poor yields from the 2022 crop and continued increases in the cost of labor energy and ingredients for batter coatings.

Speaker 5: The increase was partially offset by supply chain productivity savings, lower costs for edible oils, and lower freight costs.

The increase was partially offset by supply chain productivity savings lower costs for edible oils and lower freight cost.

Speaker 5: SG&A, excluding comparability items, increased $45 million to $160 million. More than half of the increase was from incremental SG&A with the consolidation of EMEA.

SG&A, excluding comparability items increased $45 million to $160 million more than half of the increase was from incremental SG&A with the consolidation of EMEA.

Speaker 5: The remainder was largely driven by higher expenses related to improving our IT and ERP infrastructure, and to a lesser extent, higher compensation and benefit expenses and higher advertising and promotion expenses.

The remainder was largely driven by higher expenses related to improving our it and ERP infrastructure and to a lesser extent higher compensation and benefit expenses and higher advertising and promotion expenses.

Speaker 5: All of this led to adjusted EBITDA increasing 76% to $413 million.

All of this led to adjusted EBITDA, increasing 76% to $413 million.

Speaker 5: Higher sales and gross profit in the base business drove most of the growth, with the remainder attributable to incremental earnings from consolidating EMEA.

Higher sales and gross profit in the base business drove most of the growth with the remainder attributable to incremental earnings from consolidating EMEA.

Speaker 5: Moving to our segments, this is the first quarter that we operated in our two new reporting segments, North America and International.

Moving to our segments. This is the first quarter that we operated in our two new reporting segments, North America and international.

Speaker 5: Beginning with our North America segment, which includes sales to customers in all channels in the US, Canada, and Mexico, sales were up 19% in the last year.

Beginning with our North America segment, which includes sales to customers in all channels in the U S, Canada and Mexico sales.

Sales were up 19% in the quarter price mix was up 24%, which was driven by the carryover benefit of pricing actions that took effect in fiscal 2023 across each of our primary sales channels, the timing of trade spending and favorable mix as we benefit from our revenue growth management initiatives.

Speaker 5: Price mix was up 24%, which was driven by the carryover benefit of pricing actions that took effect in fiscal 2023 across each of our primary sales channels, the timing of trade spending, and favorable mix as we benefit from our revenue growth management initiatives. Lower freight revenue partially offset the increase. The value of

Lower freight revenue, partially offset the increase.

Volume in North America declined 5%.

Speaker 5: This primarily reflects our decisions to exit volume related primarily to two lower priced and lower margin contracts that largely began to impact our sales in the second and third quarters of fiscal 2023.

This primarily reflects our decision to exit volume related primarily to two lower priced and lower margin contracts that largely began to impact our sales in the second and third quarters of fiscal 2023.

Speaker 5: To a lesser extent, inventory de-stocking by certain customers and retail channels also pressured volume.

To a lesser extent inventory destocking by certain customers in retail channels also pressured volumes.

Speaker 5: We don't anticipate further effects from the retail de-stocking after the first quarter.

We don't anticipate further effects from the retail destocking after the first quarter.

Speaker 5: North America's segment adjusted EBITDA increased $148 million to $379 million as the carryover benefit of pricing actions, the timing of trade spending, and favorable mix more than offset, higher cost per pound, and the impact of lower volume.

North America segment, adjusted EBITDA increased $148 million to $379 million as the carryover benefit of pricing actions, the timing of trade spending and favorable mix more than offset higher cost per pound and the impact of lower volumes.

Unknown Executive: Good day, and welcome to the Lamb Weston First Quarter Earnings Call. Today's conference is being recorded.

Dexter Congbalay: At this time I let you in the presentation over to Mr. Dexter Congbalay, VP of Investor Relations and Strategy. Please go ahead sir. Good morning and thank you for joining us for Lamb Weston's First Quarter 2024 Earnings Call. This morning we issued our earnings press release, which is available on our website lambweston.com. Please note that during our remarks we will make some forward-looking statements about the company's expected performance that are based on how we see things today.

Speaker 5: Moving to our international segment, which includes sales to customers in all channels outside of North America.

Moving to our international segment, which includes sales to customers in all channels outside of North America.

Speaker 5: Sales grew 360 million, or 212%, and included $375 million of incremental sales from the EMEA and Argentina acquisition.

<unk> grew $360 million or 212% and included $375 million of incremental sales from EMEA and Argentina acquisition.

Speaker 5: Excluding these acquisitions, net sales declined 9%. While price mix was up 18%, driven by the carryover benefit of pricing actions taken in fiscal 2023, as well as favorable mix, lower volume and freight revenue offset the increase.

Excluding these acquisitions net sales declined 9%, while price mix was up 18% driven by the carryover benefit of pricing actions taken in fiscal 2023, as well as favorable mix lower volume and freight revenue offset the increase.

Dexter Congbalay: Actual results may differ materially due to risks and uncertainties. Please refer to the cautionary statements and risk factors contained in our SEC filings for more details on our forward-looking statements. Some of today's remarks include non-gap financial measures. These non-gap financial measures should not be considered a replacement for and should be read together with our gap results. You can find the gap, non-gap reconciling for the actions in our earnings release.

Speaker 5: As expected, volume, excluding acquisitions, declined 27%.

As expected volume, excluding acquisitions declined 27%.

Speaker 5: The decrease primarily reflects our decisions to exit two very low price, low margin accounts that largely began to impact our international sales volume in our fiscal fourth quarter of 2023.

The decrease primarily reflects our decision to exit two very low price low margin accounts that largely began to impact our international sales volume in our fiscal fourth quarter of 2023.

Tom Warner: With me today, our Tom Warner, our President and Chief Executive Officer, and Bernadette Madriata, our Chief Natural Officer. Tom will provide an overview of the current operating environment. Bernadette will then provide details on our first quarter results as well as our updated outlook for fiscal 2024. With that, let me now turn the call over to Tom. Thank you, Dexter. Good morning and thank you for joining our call today. We delivered a strong start to the years.

Speaker 5: To a lesser extent, continued inventory de-stocking also impacted volumes in the quarter, but as I mentioned earlier, we believe the effect of de-stocking is largely over.

To a lesser extent continued inventory destocking also impacted volumes in the quarter, but as I mentioned earlier, we believe the effect of Destocking is largely over.

Speaker 5: Despite a 27% decline in our international segment volume, segment adjusted EBITDA increased $57 million to $90 million.

Despite a 27% decline in our international segment volume segment, adjusted EBITDA increased $57 million to $90 million.

Tom Warner: We continued to execute on our strategies to drive sustainable, profitable growth. Our integration of our MEA operations is progressing well. Our capacity expansion in China is now up and running, and our other expansion and modernization efforts around the globe remain on track. Our supply chain teams continue to drive productivity savings, and our commercial teams remain focused on serving our customers and driving innovation across all channels. While our volume was down versus the prior year, it was in line with our expectations and was primarily driven by our decisions to exit lower priced, lower margin business.

Speaker 5: Incremental earnings from the consolidation of EMEA's financial results, as well as favorable price mix, drove most of the increase, more than offsetting the impact of higher cost per pound and lower volumes in our legacy Lam Weston business.

Incremental earnings from the consolidation of Emea's financial results as well as favorable price mix drove most of the increase more than offsetting the impact of higher cost per pound and lower volumes in our legacy Lamb Weston business.

Speaker 5: Moving to our liquidity position and cash flow. We continue to maintain a solid balance sheet with ample liquidity and a low leverage ratio. We ended the quarter with more than $160 million of cash and no borrowings under our $1 billion US revolver. Our net debt was about $3.3 billion, which puts our leverage ratio at 2.3 times.

Moving to our liquidity position and cash flow.

We continue to maintain a solid balance sheet with ample liquidity and a low leverage ratio. We ended the quarter with more than $160 million of cash and no borrowings under our $1 billion U S revolver, our net debt was about $3 $3 billion, which puts our leverage ratio.

Tom Warner: We should see our year-over-year volume trends improve as the year progresses as we begin to lap and backfill, exit the volumes with higher margin business. Overall, we feel good about the health of the category, our first quarter financial results, and our operating momentum, and have raised our sales and earning targets for the year. Let me now turn to the current operating environment. The global frozen potato category continues to be solid with overall demand and supply balanced.

At two three times.

Speaker 5: We generated about $335 million of cash from operations, or about $140 million more than the prior year quarter, largely due to the higher earnings.

We generated about $335 million of cash from operations or about $140 million more than the prior year quarter largely due to the higher earnings.

Speaker 5: Capital expenditures were about $305 million, which is up about $180 million from the prior year quarter, primarily due to construction costs as we continue to expand processing capacity in China, Idaho, Argentina, and the Netherlands.

Capital expenditures were about $305 million, which is up about $180 million from the prior year quarter, primarily due to construction costs as we continue to expand processing capacity in China, Idaho, Argentina in the Netherlands.

Tom Warner: Fry attachment rates, which is a rate at which consumers order fries when visiting a restaurant or other food service outlets across our key markets have remained largely steady and above pre-pandemic levels. Restaurant traffic in our key markets was generally solid. In the US, overall restaurant traffic was flat versus the prior year quarter, as QSR traffic growth offset further traffic declined in full service restaurant channels. We believe that this is the cumulative effect of inflation and other macro pressures on the consumer over the past few years, favoring QSR traffic and tampering full service and casual dining traffic.

Speaker 5: During the quarter, we returned more than $140 million of cash to our shareholders, including $41 million in dividends.

During the quarter, we returned more than $140 million of cash to our shareholders, including $41 million in dividends most.

Speaker 5: Most of the cash returned was from repurchasing $100 million of shares. That's more than double what we repurchased in all of 2023, as we acted opportunistically based on our stock price performance during our August open trading window.

Most of the cash return was from repurchasing $100 million of shares that's more than double what we repurchased in all of 2023 as we acted opportunistically based on our stock price performance during our August open trading window.

Speaker 6: While our share buyback program is targeted to offset annual equity compensation dilution, we will continue to be opportunistic based on other capital allocation needs and the potential for generated solid returns based on our stock's trading value.

While our share buyback program is targeted to offset annual equity compensation dilution. We will continue to be opportunistic based on other capital allocation needs and the potential for generated solid return based on our stocks trading value.

Tom Warner: While overall traffic growth did slow sequentially from about 1% in our physical fourth quarter, as quick service restaurant traffic growth cooled, much of that weakness within June, and we're encouraged that both QSR and full service restaurant traffic trends improved as a quarter progressed. In Europe, restaurant traffic grew in many of our key markets. In the UK, traffic was up mid-single digits, with growth in both QSR and full service restaurants. Growth was also solid in France, Germany, Italy, and Spain.

Turning to our updated fiscal 2020 for outlook.

Speaker 6: Based on our strong first quarter performance, we raised our financial targets for the year. While we continue to expect macro operating conditions to remain challenging, the overall current demand and pricing environment remain solid.

Based on our strong first quarter performance, we raised our financial targets for the year, while we continue to expect macro operating conditions to remain challenging the overall current demand and pricing environment remains solid.

Speaker 6: In addition, as Tom mentioned, we believe the potato crops in our growing regions in North America and Europe will be consistent with pre-pandemic historical averages. And we're generally pleased with how the discussions to renew remaining contracts are progressing.

In addition, as Tom mentioned, we believe the potato crops in our growing regions in North America, and Europe will be consistent with pre pandemic historical averages and we're generally pleased with how the discussions to renew remaining contracts.

Tom Warner: In Asia, China restaurant traffic growth was very strong, but off to press levels as a country rebounded from severe COVID-related restrictions. Traffic in Japan was solid in both QSR and full service restaurants. We suspect that restaurant traffic trends will be volatile in the near term as high interest rates, high inflation, and uncertainty continues to affect consumers. That said, frozen potato demand has proven resilient during the most challenging economic times, and we continue to be confident in the long-term growth prospects of the global category.

Are progressing in aggregate.

Speaker 6: Specifically, we continue to expect strong net sales gains for the year and have increased our annual net sales target to $6.8 to $7 billion, which is up from our previous target of $6.7 to $6.9 billion. This includes $1.1 to $1.2 billion of incremental sales attributable to EMEA during the first three quarters of the year, which is up $100 million from our previous estimate.

Specifically, we continue to expect strong net sales gains for the year and have increased our annual net sales target to six $8 billion to $7 billion, which is up from our previous target of $6 seven to $6 9 billion. This includes one one to $1 $2 billion.

Incremental sales attributable to EMEA during the first three quarters of the year, which is up $100 million from our previous estimate.

Tom Warner: Now, with respect to costs, we continue to expect input cost inflation in the mid-to-high single digits, largely driven by higher contract prices for potatoes, including a 20% increase in North America, and a 35% to 40% increase in Europe. Much of our inflation-driven pricing across our channels has either already been announced or included in price escalators within existing contracts. Customer contracts representing about 20% of our North American business are in the process of being finalized, and we feel good in the aggregate about the likely pricing and terms.

Speaker 5: This represents a 6.5 to 8.5% net sales growth, excluding acquisition.

This represents a six five to eight 5% net sales growth excluding acquisitions for.

Speaker 6: For the year, we're targeting price mix to be up low double digits, which means that we expect price mix will slow sequentially from the 23% increase that we delivered in the first quarter as we begin to lap some of our price actions that we began implementing in the second quarter of last year.

For the year, we're targeting price mix to be up low double digits, which means that we expect price mix will slow sequentially from the 23% increase that we delivered in the first quarter as we begin to lap some of our price actions that we began implementing in the second quarter of last year.

Tom Warner: Over the long term, we continue to expect pricing actions and supply chain productivity improvements will be the primary levers to offset inflation. We'll also continue to drive improvements in products and customer mix to benefit sales, growth, and profitability. Now, with respect to the upcoming potato crop, we are harvesting and processing the crops in our growing regions in both North America and Europe, and we believe the crops in the Columbia Basin, Idaho, Alberta, and the Midwest are in line with pre-pandemic historical averages.

Speaker 6: While the overall potato category continues to be solid, due to the timing of contract openers, we're targeting our full year volume, excluding acquisitions, to be down this single digit compared with the prior year.

While the overall potato category continues to be solid due to the timing of contract openers, we're targeting our full year volume excluding acquisitions to be down mid single digits compared with the prior year.

Speaker 6: And we expect year-over-year volume trends will continue to improve as the year progresses, as we lap some of the significant low margin, low profit volume that we chose to exit in the second half of last year, and as we gradually backfill the exited lower margin business with more profitable business.

And we expect year over year volume trends will continue to improve as the year progresses.

As we lap some of the significant low margin low product profit volume that we chose to exit in the second half of last year and as we gradually backfill the exited lower margin business with more profitable business.

Tom Warner: In Europe, we believe that the crop will also be in line with historical averages as a result of improved growing conditions. We'll provide our final assessment of the crop, including how it performs out of stores when we report our second quarter results in early January. So, in summary, we delivered solid results in the first quarter and continued to have good operating momentum. The overall category remains healthy with demand and supply largely balanced, and finally, at this time, we believe the potato crops in our growing regions in North America or in Europe will be in line with pre-pandemic averages.

Speaker 6: For earnings, we raised our adjusted EBITDA target by about $90 million to $1.54 to $1.62 billion, up from our previous estimate of $1.45 to $1.525 billion.

For earnings we raised our adjusted EBITDA target by about $90 million to $1 five four to 162 billion.

Up from our previous estimate of 145 to 152 5 billion.

Speaker 6: Using the midpoint of this updated range implies growth of about 26% or about $300 million versus the prior year.

Using the midpoint of this updated range implies growth of about 26% or about $330 million versus the prior year.

Speaker 6: We left our target for SG&A unchanged at $765 to $775 million.

We left our target for SG&A unchanged at $765 million to $775 million.

Speaker 6: While our first quarter run rate suggests a lower target, we continue to anticipate spending will build as the year progresses.

While our first quarter run rate suggests a lower target we continue to anticipate spending will build as the year progresses.

Speaker 6: We reduced our interest expense target by $10 million to $155 million as we expect to partially offset cash interest with more capitalized interest associated with our capacity expansion.

We reduced our interest expense target by $10 million to $155 million as we expect to partially offset cash interests with more capitalized interest associated with our capacity expansion.

Bernadette Madarieta: Let me now turn the call over to Bernadette. Thanks, Tom, and good morning, everyone.

Bernadette Madarieta: I want to start off by thinking the entire lamblustin team for the strong start to the year. Our performance speaks for itself, and it's a testament to the passion and dedication of our entire lamblustin team. We recognize that we're operating in a challenging macro environment, but the strong first quarter performance has allowed us to raise our fiscal 2024 financial targets.

Speaker 6: Our other financial targets remain the same, including depreciation and amortization expense of approximately $325 million and capital expenditures of $800 to $900 million.

Our other financial targets remain the same including depreciation and amortization expense of approximately $325 million and capital expenditures of $800 million to $900 million.

Speaker 6: In summary, we're executing our strategies to deliver strong top and bottom line growth.

In summary, we're executing our strategies to deliver strong top and bottom line growth.

Bernadette Madarieta: Let's start with reviewing our first quarter results. Compared with the prior year, sales increase $540 million or 48% to about 1.7 billion. About 375 million or 70% of the increase was attributable to the incremental sales from acquisitions, with most coming from our amyabids. Business. We lap the Argentina acquisition this quarter, but we'll continue to receive the incremental benefit from the consolidation of the AMIA operations in the second and third quarters. As a reminder, since we began to consolidate AMIA sales beginning in the fourth quarter of fiscal 2023, those results are included in our last year's sales baseline.

Speaker 6: by improving our customer and product portfolio mix and offsetting input cost inflation through pricing actions and driving productivity savings across our supply chain.

By improving our customer and product portfolio mix and offsetting input cost inflation through pricing actions and driving productivity savings across our supply chain.

Speaker 6: Volume elasticities in response to inflation-based pricing actions have been generally low, and we expect volume trends to improve as the year progresses.

Volume elasticity in response to inflation based pricing actions have been generally low and we expect volume trends to improve as the year progresses.

Speaker 6: While we remain cautious about the effect of inflation on the consumer, we feel good about the start of the year and the health of the category, which gives us the confidence to raise our full year sales and earnings targets. And with that, let me now turn it back over to Tom for some closing comments.

While we remain cautious about the effect of inflation on the consumer we feel good about the start of the year and the health of the category, which gives us the confidence to raise our full year sales and earnings targets and with that let me now turn it back over to Tom for some closing comments.

Speaker 4: Thanks, Bernadette. We delivered a strong quarter and our operating momentum has us well positioned to deliver another year of solid sales and earnings growth. In addition, we're confident in the health of the global category and remain committed to investing in our business to drive sustainable profitable growth and create value for our shareholders over the long term.

Thanks, Mark we delivered a strong quarter in our operating momentum has us well positioned to deliver another year of solid sales and earnings growth. In addition, we are confident in the health of the global category and remain committed to investing in our business to drive sustainable profitable growth and create value for our shareholders over the long term.

Bernadette Madarieta: Excluding the incremental sales from our acquisitions, net sales group 15 percent. Price Mix was up 23 percent as we benefited from the pricing actions taken in fiscal 2023 in both our North America and international segments to counter input and manufacturing cost inflation. Mix was also favorable as we continue to strategically manage our product and customer portfolio. In addition, we estimate the price mix in the quarter benefited by a couple percentage points from lower than expected trade spending associated with pricing actions that we began implementing in the last month of fiscal 2023.

Speaker 4: And finally, as you may know, we will be hosting an investor day on Wednesday, October 11th at the New York Stock Exchange.

And finally as you May know, we will be hosting an investor day on Wednesday October 11th at the New York Stock exchange during the presentation, we will discuss our view of the industry, our strategies for growth and our long term financial targets and capital allocation policies.

Speaker 4: During the presentation, we'll discuss our view of the industry, our strategies for growth, and our long-term financial targets and capital allocation policies.

Speaker 4: If you haven't already, please register if you plan on attending in person as space is limited. Otherwise, you can view our presentation via our webcast, which you will be able to access through our website. Thank you for joining us today. Now we're ready to take your questions.

If you haven't already please register if you plan on attending in person as space is limited otherwise you can view our presentation via our webcast, which you will be able to access through our website.

Bernadette Madarieta: This may be largely timing related and as a result could be a slight headwind as the year progresses. The trade spend benefit in the quarter, however, was mostly offset by a roughly two-point headwind related to lower freight charges passed on to customers as transportation costs have come down from the prior year period. As a reminder, our goal is to match freight charge to our customers with our transportation costs so that their effect on our profits is neutral over time.

Thank you for joining us today and now we're ready to take your questions.

Speaker 2: And if you would like to ask a question, please signal by pressing star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach your equipment. Once again, that is star 1 if you would like to ask a question.

And if you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. Once again that is star one if you would like to ask a question.

Speaker 2: And we'll take our first question from Peter Galba with Bank of America.

And we'll take our first question from Peter Galbo with Bank of America.

Hey, guys. Good morning, Thanks for taking the questions.

Bernadette Madarieta: In line with expectations, overall sales volumes declined 8 percent. The decline was primarily due to our decisions to exit volume related primarily to four of our lower priced and lower margin contracts as part of our revenue growth management initiatives. And to a lesser extent, continued inventory destocking by certain customers in international markets and in select US retail channels also impacted volume. We believe the effect of these destocking actions is largely behind us and should have little impact if any on our results going forward.

Good morning again.

Speaker 7: Tom and Bernette, thank you both very much for the color around price mix and volume for the year. Tom, I was hoping to ask maybe a two-part question on Volume 1. Maybe help us a little bit with cadence on when some of these backfill higher margin customers are going to be coming in.

Tom and Burnett. Thank you both very much for the color around price mix and volume for the year.

Tom I was hoping to ask maybe a two part question on volume one just maybe help us a little bit with cadence on when some of the backfill higher margin customers potentially start to come online for you and then Brian I know you kind of gave order of magnitude on international but.

Speaker 7: potentially start to come online for you. And then Bernadette, I know you kind of gave order of magnitude on international, but if there's anything more, a finer point on volumes between just what was intentional walk away versus the D stock impact in the quarter would be helpful. Thanks very much.

Theres anything more of a finer point on volumes between just what was intentional walk away versus the destocking impact in the quarter would be helpful. Thanks very much.

Speaker 4: Yeah, so Peter, Tom, so as Bernadette alluded to, it was limited to four accounts. And it was important for us to maintain our pricing discipline. One of the accounts in international specifically, we were losing money on. So it was time just to part ways. And that had a big impact on our international volume.

Yes so.

Peter.

Bernadette Madarieta: It's important to note that volume elasticity or the amount of volume lost in response to inflation based pricing actions have been generally low. We expect our year-over-year volume trends to improve as the year progresses as we lap the volume we exited and backfill volume with higher margin business.

So as far as Ed alluded to is.

Was limited to four accounts and it.

It was important for us to maintain our pricing discipline one of the accounts in international specifically, we're losing money on so it was time just to part ways.

And that had a big impact on our international volume.

Speaker 4: So, you know, it was a measured.

So it was a measured.

Bernadette Madarieta: Moving on from sales, growth profit in the quarter, excluding comparability items, increased $213 million to $490 million. Nearly three quarters of the increase was driven by the cumulative benefit of pricing actions. The timing of trade spending, mixed improvement and supply chain productivity in our legacy, land, western business, which more than offset higher input and manufacturing cost per pound. And the impact of lower volumes. The remaining roughly one quarter of the increase was attributable to incremental earnings from consolidating the Mia.

Speaker 4: disciplined action we did and the thing in terms of your, the first part of your question

Disciplined action, we did and the thing.

In terms of the.

First part of your question, we have line of sight.

Speaker 4: We have line of sight to back filling that volume. It does take time. It's not a linear match when you walk away. Been through this before, but we have a great commercial team that has identified a number of opportunities in the market in both North America and international, and we're actively working that. And as we stated in the prepared remarks.

Two back filling that volume it does take time, it's not a it's not a linear match when you walk away.

<unk> been through this before but we have a great commercial team that has identified a number of opportunities in the market in both North America and international and we're actively working to add and as as we stated in the prepared remarks.

Speaker 4: You know, volume is going to be sequentially getting better over the next...

Volume is going to be sequentially getting better over the next.

Bernadette Madarieta: Including the delutive impact of the Mia acquisition are gross margin percentage, excluding comparability items, increased 480 basis points to 29.4%. While first quarter margins have historically been our lowest margin quarter, we estimate that the timing of trade spending that I mentioned earlier accounted for approximately 200 basis points of the increase, which would put our normalized first quarter gross margin, including acquisitions approaching 28%. The increase was partially offset by supply chain productivity savings, lower cost for edible oils and lower freight costs.

Speaker 4: quarter and the back half of the year, we expect that the category is in good shape. Between organic growth and some things that we have identified, I feel great about where we're at and how we're going to execute and continue to grow the volume in the back half of the year and over the course of the next.

Quarter in the back half of the year.

We expect the categories and really it's in good shape, so between organic growth and.

Some things that we have identified.

I feel great about where we're at and how we're going to execute.

Continued to grow the volume in the back half of the year end.

Over the course of the next.

Several quarters.

Speaker 6: Yeah, and Peter, just got a second question. Oh, so the second question you asked, you know, that those volume exits started impacting our international sales in our fiscal fourth quarter of 23. And the business that we chose to walk away from, I'd say about 90% of that relates to that in terms of volume decline, you know, with the remainder being the D stock.

Yeah, Peter just got it second question Oh, the second question you asked.

Those volume exits started impacting our international sales in our fiscal fourth quarter of 'twenty three.

And the business that we chose to walk away from I would say about 90% of that relates to that in terms of volume decline.

The remainder being the Destocking.

Speaker 7: Got it. Very, very helpful. Thank you. And then Tom, you know, one question I've just been getting on the crop itself, obviously, you know, the crop in your main regions is coming pretty well. I think there's been some issues in the East Coast Canada crop. Just curious kind of how you think that might impact the overall category here over the course of the next year in terms of industry tightness. Thanks very much.

Got it very helpful. Thank you and then Tom one question I've just been getting on the call.

<unk> itself, obviously the crop in your main regions is coming pretty well I think there's been some issues in the in the East Coast, Canada crop just curious kind of how you think that might impact the overall category here.

Bernadette Madarieta: SGNA, excluding comparability items, increased $45 million to $160 million, more than half of the increase was from incremental SGNA with the consolidation of AMIA. The remainder was largely driven by higher expenses related to improving our IT and ERP infrastructure, and to a lesser extent higher compensation of benefit expenses and higher advertising and promotion expenses.

Over the course of the next year in terms of industry tightness, thanks very much.

Speaker 4: Yeah, Peter, I think the crops and you know, we'll have a, as we do every January in our earnings call, kind of a debrief on how we're feeling about the overall crop and storage. Crops in great shape worldwide, so I don't expect any impacts in any region in terms of challenges with the crop at this point.

Yes, Peter I think the crops and we will have as we do every January on our earnings call kind of a debrief on how we feel about the overall crop and storage crops in great shape worldwide.

So I don't expect any impacts.

Any region in terms of challenges with the drop at this point.

Bernadette Madarieta: All of this led to adjusted EBITDA increasing 76% to $413 million. Higher sales and gross profit in the base business drove most of the growth, with the remainder attributable to incremental earnings from consolidating AMIA.

Thanks, very much guys.

Yep. Thank you.

Speaker 2: We'll now take our next question from Tom Palmer with JP Morgan.

We will now take our next question from Tom Palmer with Jpmorgan.

Speaker 8: Good morning and thanks for the questions I wanted to ask them the guidance.

Good morning, and thanks for the questions.

Bernadette Madarieta: Moving to our segments, this is the first quarter that we operated in our two new reporting segments, North America and International. Beginning with our North America segment, which includes sales to customers in all channels in the U.S., Canada and Mexico, sales were up 19% in the quarter. Price mix was up 24%, which was driven by the carryover benefit of pricing actions that took effect in fiscal 2023 across each of our primary sales channels, the timing of trade spending, and favorable mix as we benefit from our revenue growth management initiatives.

You're asking the guidance boost.

Speaker 8: I would assume some flow through of the higher EMEA sales, but the bulk of the increase on earnings seems to be more related to the gross margin outlook. Is this mainly a reflection of pricing or a lowered COGS inflation outlook? I realize there might have been some conservatism in the prior number, but just try to understand the moving parts.

I would assume some flow through of the higher EMEA sales.

The increase on earnings seems to be more related to the gross margin outlook is this mainly reflecting a place or a lower cogs inflation outlook.

There might have been some conservatism into prior number but just trying to understand the moving parts.

Speaker 6: Yeah, so, you know, we feel good about the operating momentum that we've had. It's been primarily related to pricing. You know, and we think that those financial targets are really prudent given the macro environment that we're facing, as well as just uncertainty regarding consumer health. So, most of that's pricing and still really good about the operating momentum of the business. Okay, thank you.

Yeah. So we feel good about the operating momentum that we've had it's been primarily related to pricing.

And we think that those financial targets are really prudent given the macro environment that we're faced with phasing as.

Bernadette Madarieta: Lower freight revenue partially offset the increase. Volume in North America declined 5%. This primarily reflects our decisions to exit volume related primarily to two lower priced and lower margin contracts that largely began to impact our sales in the second and third quarters of fiscal 2023. To a lesser extent, inventory destocking by certain customers and retail channels also pressured volumes.

As well as just uncertainty regarding consumer health. So most of that is pricing and feel really good about the operating momentum of the business.

Okay. Thank you.

And then I wanted to just.

Speaker 8: Follow up on that gross margin piece. Traditionally we've seen second quarter gross margin come in above the first quarter and then third quarter. Come in above the 2nd quarter is this cadence reasonable when we think about the build for this year?

Follow up on that gross margin piece traditionally we've seen second quarter gross margin came in above the first quarter and third quarter.

Above the second quarter is this cadence reasonable when we think about the build for this year.

Speaker 6: Yeah, so you're right. Typically we do see a sequential step up in Q2. I think we'll still see a sequential step up, but it may be more muted because we're going to be lapping some of those pricing actions that were taken last year as well as the timing of the customer trade claims that I talked about.

Bernadette Madarieta: We don't anticipate further effects from the retail destocking after the first quarter. North America's segment adjusted EBITDA increased $148 million to $379 million as the carryover benefit of pricing actions, the timing of trade spending, and favorable mix more than offset higher cost per pound in the impact of lower volumes.

Yeah, So you're right typically we do see a sequential step up in Q2, I think we'll still see a sequential step up but it may be more muted because we're going to be lapping some of those pricing actions that were taken last year as well as the timing of the customer trade claims that I talked about.

Understood. Thank you.

Speaker 3: Yeah, hey, Tom, remember that, you know, what burned that matching before? Yeah, we printed 29 for. You know, but if you take away some of the timing impacts of that trade span. Probably a little bit south of 28.

Yeah, Hey, Tom remember, what Brent had mentioned before yes, we print a 29 four.

Bernadette Madarieta: Moving to our international segment, which includes sales to customers in all channels outside of North America. Sales grew 360 million, or 212 percent, and included $375 million of incremental sales from the Amia and Argentina acquisitions. Excluding these acquisitions, net sales declined 9 percent, while price mix was up 18 percent driven by the carryover benefit of pricing actions taken in fiscal 2023 as well as favorable mix, lower volume and freight revenue offset the increase.

But if you take away some of the timing impacts of that trade spend probably a little bit south of 28.

Speaker 6: As a base. Yeah, that's right Tom. So when I'm speaking to the step up, I'm speaking up to more normalized 28% that I referred to.

As a base, yes, that's right Tom so when I'm speaking to the step up I'm speaking up to more normalized 28%.

That I referred to.

Okay.

Understood.

Thanks.

Thank you.

Speaker 2: We'll now take our next question from Adam Samuelson with Goldman Sachs.

We will now take our next question from Adam Samuelson with Goldman Sachs.

Yes, Thank you and good morning, everyone.

Speaker 9: Good morning. Good morning. I guess the first question is related maybe to mix and clearly you're making some conscious decisions on moving away from some lower margin business, but just more broadly, can you speak to maybe the, if we try to cut.

Bernadette Madarieta: As expected, volume excluding acquisitions declined 27 percent. The decrease primarily reflects our decisions to exit to very low priced low margin accounts that largely began to impact our international sales volume in our fiscal fourth quarter of 2023. To a lesser extent, continued inventory destocking also impacted volumes in the quarter, but as I mentioned earlier, we believe the effect of destocking is largely over. Despite a 27 percent decline in our international segment volume, segment adjusted EBITDA increased $57 million to $90 million.

Good morning.

Morning.

So I guess my first question is related maybe to mix in and clearly you're making some conscious decisions on moving away from from low margin from some lower margin business, but just more broadly can you speak to maybe the if we tried to cut.

Speaker 9: cut your volumes between kind of more traditional straight run fries versus some of the more upgraded products and battered and coated and the like that you're now producing. Help quantify what that represents as a proportion of the business today and where that can be getting to whether it's with.

Hi, your volumes between kind of more traditional straight run fries versus some of the more upgraded products and battered encoded in the legs that you are now producing help us can you help quantify kind of what that represents as a proportion of the of the business today and where that can be getting too whether it's with some of these.

Speaker 9: business exits more recently or over the next couple years. So that's the mix is a very powerful margin driver for the business and trying to dimensionalize how much more room there is there to go.

Business exits more recently or over the next couple of years.

Bernadette Madarieta: Incremental earnings from the consolidation of Amia's financial results as well as favorable price mix drove most of the increase, more than offsetting the impact of higher cost per pound and lower volumes in our legacy land-western business. Moving to our liquidity position and cash flow, we continue to maintain a solid balance sheet with ample liquidity and a low leverage ratio. We ended the quarter with more than $160 million of cash and no borrowings under our $1 billion US revolver.

Mix has been a very powerful margin driver for the business and trying to dimensionalize, how much how much more room there to go.

Speaker 6: Yeah, Adam, you know, strong price mix performance was the key driver of our better than expected financial results as it relates to mix and how that relates to growth going forward. We'll be covering that in our industry. Investor call next week and so, you know, we'll cover that more then. But again, strong price mix was the key driver of our better than expected performance.

Yeah, Adam strong price mix performance was the key driver of our better than expected financial results as it relates to mix and how that relates to growth going forward will be covering that in our industry.

Investor call next week, and so we will cover that more then but again strong price mix was the key driver of our better than expected performance.

Bernadette Madarieta: Our net debt was about $3.3 billion, which puts our leverage ratio at 2.3 times. We generated about $335 million of cash from operation or about $140 million more than the prior year quarter largely due to the higher earnings. Capital expenditures were about $305 million, which is up about $180 million from the prior year quarter, primarily due to construction costs, as we continue to expand processing capacity in China, Idaho, Argentina, and the Netherlands.

Speaker 9: Okay, and then if I could just ask a second one. I know you talked about the kind of customer trends in Europe . What the EMEA, the acquired EMEA business, what was their organic volume growth in the quarter and the increased revenue contribution in EMEA? Is that a more positive volume outlook, more positive price mix outlook?

Okay, and then if I could just ask a second one I know you talked about kind of customer trends in Europe , what the EMEA the acquired EMEA business, what was their organic volume growth.

In the quarter and the increased revenue contribution in EMEA is that a more positive volume outlook more positive price mix outlook or both.

Speaker 6: Yeah, so we feel really good about the EMEA performance. We have not given the prior year comp because as you know, the EMEA sales were not reported in the prior year in our sales number. It was recorded in our equity method earnings. But, you know, our estimate is...

Yes, so we feel really good about the EMEA performance.

We have not given the prior year comp because as you know.

The EMEA sales were not reported in the prior year in our sales number it was recorded in our.

Bernadette Madarieta: During the quarter, we return more than $140 million of cash to our shareholders, including $41 million in dividends. Most of the cash return was from repurchasing $100 million of shares. That's more than double what we were purchased in all of 2023, as we acted opportunistically based on our stock price performance during our August open trading window. While our share buyback program is targeted to offset annual equity compensation dilution, we will continue to be opportunistic based on other capital allocation needs and the potential for generated solid return based on our stocks trading value.

Equity method earnings.

But.

Our estimate is largely in line for the remainder of the year at the run rate that we saw for EMEA and Q4 and Q1 from a sales perspective about $360 million.

Speaker 6: largely in line for the remainder of the year at the run rate that we saw for EMEA in Q4 and Q1 from a sales perspective of about, you know, 360 million dollars. okay all right

Okay, Alright, I appreciate it I appreciate that color I'll pass it on thanks.

Okay.

Speaker 2: We'll now take our next question from Matt Smith with Stifel.

We will now take our next question from Matt Smith with Stifel.

Hi, good morning.

Speaker 10: Morning I want to ask about the impact of of walking away from low margin contracts in this mix management you've been pursuing. That's weight on volumes over the past couple of quarters. And you mentioned that the actions in the international segment in the US segment will be fully laughed by the by the 4th quarter. So do you do you expect to be in a position to be growing volumes as you as you exit this year, meaning you've lapped those?

Good morning wanted to ask about the impact of walking away from low margin contracts in this mixed management you've been pursuing.

Bernadette Madarieta: Turning to our updated fiscal 2024 outlook, based on our strong first quarter performance, we raised our financial targets for the year. While we continue to expect macro operating conditions to remain challenging, the overall current demand and pricing environment remain solid. In addition, as Tom mentioned, we believe the potato crops in our growing regions in North America and Europe will be consistent with pre-pandemic historical averages and we're generally pleased with how the discussions to renew remaining contracts are progressing and aggregate Specifically, we continue to expect strong net sales gains for the year and have increased our annual net sales target to 6.8 to 7 billion dollars which is up from our previous target of 6.7 billion dollars This includes 1.1 to 1.2 billion dollars of incremental sales attributable to Amia during the first three-quarters of the year which is up 100 million dollars from our previous estimate This represents a 6.5 to 8.5 percent net sales growth excluding acquisitions For the year, we're targeting price mix to be up low double digits which means that we expect price mix will slow sequentially from the 23 percent increase that we delivered in the first quarter as we begin to lap some of our price actions that we began implementing in the second quarter of last year While the overall potato category continues to be solid due to the timing of contract openers we're targeting our full year volume excluding acquisition to be down this single digits compared with the prior year And we expect year over year volume trends will continue to improve as the year progresses as we lap some of the significant low margin low product profit volume that we chose to exit in the second half of last year And as we gradually backfill the exited lower margin business with more profitable business For earnings we raised our adjusted eva dot target by about 90 million dollars to 1.54 to 1.62 billion dollars up from our previous estimate of 1.45 to 1.525 billion Using the midpoint of this updated range implies growth of about 26 percent or about $330 million versus the prior year We left our target for S.G.N.A, unchanged at 765 to 775 million dollars.

On volumes over the past couple of quarters, and you mentioned that the actions in the international segment in the U S segment will be fully lapped by the by the fourth quarter. So do you do you expect to be in a position to be growing volumes as you exit this year, meaning you've lapped those.

Speaker 10: You've laughed at the drag from walking away from those contracts and you've made some progress on the backfill with higher margin business.

You've lapped the drag from walking away from those contracts and you've made some progress on the backfill with higher margin business.

Speaker 4: Yes, Max, I fully expect, as I said earlier, that in the back half of the year, we should start to see positive volume trends. And that's a function of lapping the exit of business, but also we have...

Yes, Max I fully expect as I said earlier that.

And in the back half of the year, we should start to see positive volume trends.

And.

That's a function of lapping the exited business, but also we have.

Speaker 4: line of sight to additional business that we're going to start to backfill with. And it takes time, but I fully expect based on how we've got the business forecast and the opportunities we have that we're going to start seeing positive volume trends in the back half.

Line of sight too.

Additional business that we're going to start to backfill with and it takes time.

But I fully expect based on how we've got the business forecast.

And the opportunities we have that we're going to start seeing positive volume trends in the back half.

Speaker 10: Thank you for that. Maybe if I could ask one more question here. You mentioned that the capacity in China came online in the quarter. Do you have any update to the timing for the American Falls facility? Is that still expected to be on time for beginning production early in 2024? Yeah, we we

Okay. Thank you for that and then maybe if I could ask one more question here you mentioned that the capacity in China came online in the quarter do you have any update to the timing for the American falls facility is that still expected to be on time for beginning production early in 2024.

Yes, we are.

So still expect in the late spring of 'twenty for early summer.

Speaker 4: still expect in the late spring of 24, early summer, for American Falls to transition to a vertical startup. It takes some time to get the plan up and running, but absolutely, late spring, early summer.

For American falls to.

<unk> transitioned to a vertical start up and it takes some time to get the plant up and running but.

Absolutely late spring early summer.

Thank you Tom I'll I'll leave it there and pass it on.

Thanks.

Speaker 2: We'll now take our next question from Rob Dickerson with Jefferies.

We will now take our next question from Rob Dickerson with Jefferies.

Hey, Rob you might be on mute.

Yes.

There are no reason that it will move on.

Well, it's would you like to move on the next question.

Okay, We will now move onto Robert Moscow with TD Cowen.

Speaker 2: We'll now move on to Robert Moskow with TD Cali.

Speaker 3: Hi there. Thanks for the question. Good morning. I hate to keep the magnifying glass on volume, but Tom, when you talk about positive volume in the back half, the way we had modeled it was that the easy comparisons to the volume you walked away from.

Okay.

Hi, there thanks.

Thanks for the question.

Good morning, I hate to I hate to keep the magnifying glass.

Bernadette Madarieta: While our first quarter run rate suggests the lower target we continue to anticipate spending will build as the year progresses We reduced our interest expense target by 10 million dollars to 1.55 million as we expect to partially offset cash interest with more capitalized interest associated with our capacity expansions Our other financial targets remain the same including depreciation and amortization expense of approximately 325 million dollars and capital expenditures of 800 to 900 million In summary we're executing our strategies to deliver strong top and bottom line growth by improving our customer and product portfolio mix and offsetting input cost inflation through pricing actions and driving productivity savings across our supply chain Volume elasticity in response to inflation based pricing actions have been generally low and we expect volume trends to prove as the year progresses While we remain cautious about the effect of inflation on the consumer, we feel good about the start of the year and the health of the category which gives us the confidence to raise our full year sales and earnings targets.

On volume.

Tom when you talk about positive volume in the back half the way we had modeled it was that easy comparisons to the volume you walked away from really started.

Speaker 3: really started in size in fourth and not in third. So is that correct? And if so, can we expect positive volume in third as well, even though it's not positive volume in fourth.

Yes.

In size and fourth third.

So is that correct.

And if so can we expect positive volume and third as well even though.

Speaker 11: even though the volume we walked away from may not have.

Even though the.

The volume walked away from May not have been as much.

Speaker 6: Yeah, as it relates to the volume in our North America segment, I think I alluded to the fact that we started to walk away from that in third and fourth quarter. In our international segment, we started to see the effect of what we exited in the fourth quarter of last year.

Yes.

As it relates to the volume in our North America segment, I think I alluded to the fact that we started to walk away from that in third and fourth quarter in our international segment. We started to see the effect of what we exited in the fourth quarter of last year.

Speaker 6: So as we said, we do expect to see volume continue to improve, both as we lap that business we exited and as we bring on new business.

So as we said, we do expect to see volume continue to improve.

Both as we lap that business, we exited as and as we bring on new business.

Speaker 12: Okay, so is it premature to start dicing it up by quarter and just should we just think of it as the second half or can we say third quarter up as well? Yep, no I was just thinking...

Okay. So is it premature to start with.

Icing it up by quarter.

And should we just think of it as the second half or can we say third quarter op as well.

Yes, no I would just think of it as the second half of the year.

Tom Warner: And with that, let me now turn it back over to Tom for some closing comments. We remain committed to investing in our business to drive sustainable, profitable growth and create value for our shareholders over the long term.

Speaker 11: Okay, got it. And then my other question and is. You know, I was hoping you'd give a little more color on like, what percent of your contracts come up for renewal seasonally. And also, as it relates to, like, I think a lot of the industry is on 3 year contracts instead of 1. So, like, how much is up for grabs in the next 3 to 6 months? Just roughly speaking.

Okay got.

Got it and then my other question.

Is.

I was hoping you could give a little more color on like what percent of your contracts come up for renewal seasonally.

And also as it relates to like.

I think a lot of the industries on three year contracts instead of one so like how much is up for grabs in the next three to six months.

Tom Warner: And finally, as you may know, we will be hosting an investor day on Wednesday, October 11th at the New York Stock Exchange. During the presentation, we'll discuss our view of the industry, our strategies for growth and our long term financial targets and capital allocation policies. If you haven't already, please register if you plan on attending in person as space is limited. Otherwise, you can view our presentation via our webcast which you will be able to access through our website.

Just roughly speaking.

Speaker 4: Is there a way to quantify that? Sure, Robert. In our remarks, we got about 20% in play. We feel confident about where we're at, where we're at in those discussions, how things are progressing.

Yes.

Sure Robert.

In our remarks, we got about 20% in play we feel confident about where we're at where we're at in those discussions.

Things are progressing.

Speaker 4: for us this year, so we'll get through all that, you know, over the course of the rest of this year. And, you know, at a later time, as we always do, we'll give some color on what we've got coming up in terms of contracting for our next physical year and how that's progressing. But right now.

For us this year, so we will get through all that.

Over the course of the rest of this year and.

Unknown Executive: Thank you for joining us today and now we're ready to take your questions. If you want to ask a question, please sign up by pressing star 1 on your telephone keypad. If you are using a speaker phone, please make sure your mute function is turned off to allow your signature equipment. Once again, that is star 1 if you want to ask a question.

At a later time.

As we always do we will give some color on what we've got coming up in terms of contracting for our next fiscal year.

And how that's progressing but right now.

Speaker 4: You know, we're through most of it. Feel good about where we're at. Obviously, it's all baked into our guidance. We have 20% in play. Feel good about where it's at. Commercial teams executing at a high level. Great discussions. And more to come on that. And then the next, like we do usually in our July call, we'll talk about what's coming up for contract renewal in the next physical year.

We've worked through most of it feel good about where we're at obviously its all baked into our guidance we have 20% in play feel good about where it's at the commercial team is executing at a high level great discussions.

Peter Galbo: And we'll take our first question from Peter Galbo with Bank of America. Hey guys, good morning. Thanks for taking the question. Morning. Tom and Bernad, thank you very much for the call around price mix and volume for the year.

And more to come on that and then.

The next.

Like we do usually.

Our July call, we'll talk about what's what's coming up for contract renewal in the next fiscal year.

Tom Warner: Tom, I was hoping to ask maybe a two-part question on volume 1, just maybe help us a little bit with cadence on when some of these backfill higher margin customers potentially start to come online for you. And then Bernad, I know you kind of gave order of magnitude on international, but if there's anything more a finer point on volumes between just what was intentional walk away versus the destock impact in the corner would be helpful.

Speaker 11: Sorry, I was on the ConAgra call. So, so 20% in play. And does it all kind of happen in the first...

Sorry, I was on the Conagra calls so 20% in play and just said all kind of all that go in the first pardon me.

Speaker 11: Nothing. All right. Is it all in the first half or is it seasonally or is it just spread out across the year?

Nothing.

That's fine all right.

Is it all in the first half or is it is it like it seasonally or is it just that kind of spread out across the year. This year.

Speaker 4: Oh, typically, you know, it's, we start late spring through early fall when we start the contracting discussions.

Oh typically.

We start late spring through early fall when do we start the contracting discussions.

Tom Warner: Thanks very much. Yeah, so Peter's Tom, so as Bernad had alluded to, it was limited to four accounts and it was important for us to maintain our pricing discipline. One of the accounts in international specifically, we're losing money on so it was time just to part ways. And that had a big impact on our international volume. So, you know, it was a measured discipline action we did and the thing in terms of your first part of your question, we have line of sight to backfilling that volume.

Early fall, Okay, alright, thanks, so much.

Thanks Robert.

Speaker 2: We'll now take our next question from Johnny Shamir with Barclays.

We will now take our next question from Jonny Shamir with Barclays.

Speaker 3: Great, thanks. Hey guys, it's an Angela's are hopeful as well. I and I joined late as well, so I apologize if some of this was covered, but I think I think Tom, I remember. I think last week I was talking to talk a little bit about.

Great. Thanks, Hey, guys. It's Andrew was our hope all is well.

And I joined late as well so I apologize if some of this was covered.

Tommy I remember.

I think last quarter, you started to talk a little bit about.

Speaker 13: you know, the plan sort of pivot, right, to a little bit more of a focus on profit dollars going forward. As that's the way you obviously grow the business and you've had this significant margin recovery, you know, kind of much of which.

The plan sort of pivot right, so a little bit more of a focus on profit dollars going forward.

Yes, that's the way you, obviously grow the business and you've had this significant margin recovery.

Kind of much of which has already taken place.

Speaker 13: And that kind of makes sense, right, as you think about what you're looking to do.

Tom Warner: It does take time. It's not a linear match when you walk away, been through this before, but we have a great commercial team that has identified a number of opportunities in the market in both North American International and we're actively working that. And as we stated in the prepared remarks, volume is going to be sequentially getting better over the next quarter and the back half of the year. You know, we expect that the categories in really, it's in good shape.

And that kind of makes sense right as you think about what you are looking to do.

Speaker 13: But I think there was some confusion and maybe some might have taken that to mean that

There was some confusion and maybe some might have taken that to mean that.

Speaker 13: you know, as you move towards profit dollars, that somehow you are expecting, you know, sort of ongoing or structural margin erosion going forward as some of the new capacity comes online and you know that you'd have to sort of go after lower margin business.

As you move towards profit dollars that somehow you were expecting sort of ongoing or structural margin erosion going forward as some of the new capacity comes online and that you would have to sort of.

Go after lower margin business.

Speaker 13: somehow to fill that capacity. I was just hoping to get maybe, and maybe you'll get into this a lot more, obviously next week, but.

Somehow to fill that capacity.

Was hoping you could maybe maybe I'll give it to there's a lot more obviously next week, but maybe just clarify a little bit of that because I do think there was some confusion around that.

Speaker 13: Maybe just clarify a little bit of that, because I do think there was some confusion around that. You know, I logically understand, right, the shift now that margins have kind of recovered to much more of a profit dollar focus. Thanks so much.

Tom Warner: So between organic growth and, you know, some things that we have identified, I feel great about where we're at and how we're going to execute and continue to grow the volume in the back half of the year and over the course of the next several quarters.

A logical you understand right the shift the margins of kind of recovered to much more of a profit dollar focus thanks so much.

Speaker 4: Yeah, Andrew, we're going to stay disciplined with our revenue growth management.

Yes, Andrew we're going to stay disciplined with our revenue growth management.

Speaker 4: initiative and, you know, so as we think about opportunities going forward, we are going to look at maintaining our margin profile.

Initiative and.

Bernadette Madarieta: Yeah, and Peter, just a second question. Oh, the second question you asked, you know, that those volume exit started impacting our international sales in our fiscal fourth quarter of 23. And the business that we chose to walk away from, I'd say, about 90% of that relates to that in terms of volume decline, you know, with the remainder being the destocking. Got it. Very, very helpful. Thank you.

So as we think about opportunities going forward.

We are going to look at maintaining our margin profile.

Speaker 4: and we're going to stay disciplined. And a testament of that is our decision to walk away from some of this lower margin business that we've been talking about.

And we're going to stay disciplined and.

Testament of that is our decision to walk away from some of this lower margin business that.

We've been talking about so.

Speaker 4: It's all about maintaining a discipline and what we're going to focus on. We've worked really hard to rebuild our margin profile in this business. And we're going to continue to focus on that and maintain our discipline around the margin structure.

Tom Warner: And then Tom, you know, one question I've just been getting on the crop itself, obviously, you know, the crop in your main regions is coming pretty well. I think there's been some issues in the East Coast Canada crop. Just curious kind of how you think that might impact the overall category here over the course of the next year in terms of industry tightness. Thanks very much. Yeah, Peter, I think the crops and, you know, we'll have a, as we do every January in our earnings call, kind of a debrief on how we're feeling about the overall crop and storage crops in great shape worldwide. So I don't expect any impacts in any region in terms of challenges with the crop at this point. Thanks very much, Chris. Yep. Thank you.

It's all about maintaining the discipline and what we're going to focus on we've worked really hard to rebuild our margin profile of this business and we're going to continue to focus on that and maintain our discipline around the margin structure.

Okay. Thanks see you next week.

Yeah see next week Andrew.

Speaker 2: We'll now take a question from Rob Dickerson with Jeffrey.

We will now take a question from Rob Dickerson with Jefferies.

Speaker 14: Great, thanks so much.

Great. Thanks, so much.

On mute.

Uh huh.

Speaker 14: I just I guess quick question for you, Tom, just, I guess, with respect to the China plan, right? That's up and running. Maybe coming back to Andrew's question a little bit, but ask a different way. I'm just curious.

Alright.

Question for you, Tom just I guess with respect to the China plant.

Now up and running.

Maybe coming back to Andrew's question, a little bit but.

Sure.

I'm just curious.

Speaker 14: Actually, you know, back at you for but now you have the new facility.

Exiting this business.

Tom Palmer: Well, now take our next question from Tom Palmer with JP Morgan. Good morning, and thanks for the questions. I wanted to ask on the guidance boost. I would assume some flow through of the higher AMEA sales, but the fall for the increase on, on earnings seems to be more related to the gross margin outlook. Is this mainly a reflection of pricing or a lowered cost inflation outlook? I realize there might have been some conservatism in the prior number, but just try to understand the moving parts.

Back in Q4, but now you have the new facility.

Speaker 12: Um, you know, is there now this conversation, you know, that you've been having and now can be activated kind of with the sales force such that you say, okay, there's duty here. Right?

Is there now this conversation that you've been having and now can be activated kind of with the sales force such that you say, okay. Judy here alright.

Speaker 12: You know, it is up maybe off a lower base. It's still up. There's not real demand destruction going forward. It sounds like really expected. Such that that sales force can actually go try to take. You know, material share, let's say, even non us markets just kind of given the new facility. First question.

Yeah.

It is up maybe off a lower base, it's still up.

Real demand destruction going forward it sounds like really expected.

Such that Salesforce can actually go try to take.

Materials share, let's say you've been non U S markets, just kind of given the new facility.

Tom Palmer: Yeah, so, you know, we feel good about the operating momentum that we've had. It's been primarily related to pricing. You know, and we think that those financial targets are really prudent given the macro environment that we're facing, as well as just uncertainty regarding consumer health. So most of that's pricing and still really good about the operating momentum of the business.

First question.

Speaker 4: Yeah, so the China facility, we're in early stages of our startup, so it takes some time to get it up and running. We are running production there today. It's going to be specifically targeted for that market. You know, and we've got things identified in the China market from an opportunity and business standpoint, but it takes some time. ummmm

Yes, so the China facility. We are in early early stages of our startup. So it takes some time to get it up and running we are running production. There today, it's going to be specifically targeted for that market.

We've got things identified.

Tom Palmer: Okay, thank you. And then I want to just follow up on that gross margin piece. Traditionally, we've seen second quarter gross margin come in above the first quarter and then third quarter come in above the second quarter. Is this cadence reasonable when we think about the bills for this year? Yeah, so you're right. Typically we do see a sequential step up in Q2. I think we'll still see a sequential step up, but it may be more muted because we're going to be lapping some of those pricing actions that were taken last year as well as the timing of the customer trade claims that I talked about. Understood.

<unk>.

China market.

From an opportunity of business standpoint, but it takes some time.

Speaker 4: you know, to get the plant up and running and efficient and kind of work the kinks out, but we're early on. So, you know, it's going to be.

To get the plant up and running an efficient and kind of work the kinks out, but we're early on so.

Going to be.

Speaker 4: several more quarters before we see the impact of that coming online.

Several more quarters before we see the impact of that coming online.

Speaker 12: Sorry, fair enough and then I just think you said correct me wrong that traffic was up. I believe mid fuel digit. In Europe , just 2 stars, but I know traffic was up in Europe , something better than the US. Maybe just any kind of general perspective as to why that might be the case. Kind of market, the market.

Alright fair enough.

And then I was just thinking you said correct me wrong.

Traffic was up I believe mid single digit in Europe .

Hi.

<unk>, but I know traffic was up in Europe sounds like better than the U S. Maybe.

Tom Palmer: Thank you. Hey, Tom, remember that, you know, we burned that matching before. Yeah, we printed 29.4. You know, but if you take away some of the timing impacts of that trace band, probably a little bit south of 28. As a base. Yeah, that's right, Tom. So when I'm speaking to this step up, I'm speaking up to more normalize 28% that I referred to. Okay. Understood.

Maybe just any kind of general perspective as to why that might be the case kind of market.

The market.

Okay.

Speaker 3: Hey Rob, it's probably a little bit of, might have a little bit of softness last year, just as coming out of COVID and everything like that. But overall trends seem to be pretty good. I think with inflation still a factor, but it's cooling or at least a little bit better than we were expecting, at least from the energy cost standpoint. So I think just a little bit more income is helping traffic generate or is cooling up pretty well.

Hey, Rob.

It's probably a little bit of might have a little bit of softness last year, just coming out of COVID-19 and everything like that but overall trends seem to be pretty good I think with inflation still a factor, but its cooling or at least a little bit better than people are expecting at least from the energy cost standpoint, So I think just.

Unknown Executive: Thanks.

Total income holiday traffic to generate or are we holding up pretty well.

Speaker 12: All right, great and then just quickly, the harvest coming in line with historic average is. You know, coming off 2 bad years, maybe just as a reminder kind of, you know, when we start to see that. You know, 35% of cars maybe starts to disinflate or let's call it deflate. A year of the year, it sounds like that might be what like a. Back half fiscal 25 dynamic.

Alright, great and then just quickly.

Unknown Executive: Thank you.

Adam Samuelson: Now I'll take our next question from Adam Samuelson with Goldman Techs. Yes, thank you. Good morning, everyone. Good morning. I guess the first question is related, it may be to mix and clearly you're making some conscious decisions on moving away from from low margin from some lower margin business. But just more broadly, can you speak to maybe the, if we try to cut your volumes between kind of more traditional straight run fries versus some of the more upgraded products and battered encoded and the like that you're, you're now producing.

Harvest coming in line with historic average.

Adam Samuelson: You help quantify going to what that represents is a proportion of the of the business today and where that can be getting to whether it's with some of these business exits more recently or over the next couple of years. So that's the mix has been a very powerful margin driver for the business and trying to dimensionalize how much, how much more room is there to go.

Coming off two bad years, maybe.

Maybe just as a reminder, kind of you know when we start to see that.

85% of Cogs, maybe starts to dissipate or let's call it de fleet.

Year over year, it sounds like that might be.

Back half fiscal 'twenty five dynamic.

Speaker 4: Yeah, Rob, so just a reminder our costs.

Yeah, Rob So just a reminder, our cost.

Speaker 4: and contract raw input structure is baked.

And contract raw input structure is baked so.

No.

Speaker 4: wherever the crop yields and all that comes out, it really isn't going to impact our overall input costs for the balance of this physical year. We're not going to see any...

Wherever the crop yields and all of that comes out it really isn't going to impact our overall input costs for the balance of this fiscal year.

So you.

Youre not going to see any.

Speaker 4: any decline in our cost structure because the crop is great. We agreed to a contract last year ago and we agreed to a contract last year.

Any decline in our cost structure because of the crops, great just agreed to a contract last.

Adam Samuelson: Yeah, Adam, you know, strong price mix performance was the key driver of our better than expected financial results as it relates to mix and how that relates to growth going forward will be covering that in our industry investor call next week. And so, you know, we'll cover that more then. But again, strong price mix was the key driver of our better than expected performance. OK, and then if I can just ask the second one, I know you talked about kind of customer trends in Europe, what the amea bit the acquired amea business, what was the their organic volume growth in the quarter and the increased revenue contribution in amea is that a more positive volume outlook, more positive price mix outlook or both.

A year ago and it is what it is.

Speaker 6: Yeah, that's right. And the only piece that's different in the European market is that generally will contract for about 75% whereas there's the open market for the remaining 25%. Then we've seen of late that the open market prices have started to come down.

And the only piece that's different in the European market is that generally will contract for about 75% was.

There's the open market for the remaining 25%.

Then we've seen of late that the open market prices have started to come down.

Speaker 14: Right. But as we're even I'm thinking all the way forward to let's say the end of the back up and next fiscal year. Right. I'm assuming as we go into these contracts, you know, negotiations toward the end of this calendar year. Right.

Right.

I'm thinking all the way forward to let's say the NDA.

Back half of next fiscal year.

Alright, I'm, assuming as we go into these contracts.

Negotiation go toward the end of this calendar year.

Speaker 14: Harvest is good this year probably puts you in a pretty good position in a discussion.

Harvest is good this year, probably puts you in a pretty good position.

The discussion.

Adam Samuelson: Yeah, so we feel really good about the amea performance. We have not given the prior year comp because as you know, the amea sales were not reported in the prior year in our sales number, it was recorded in our equity method earnings. But, you know, our estimate is largely in line for the remainder of the year at the run rate that we saw for amea in Q4 and Q1 from a sales perspective of about, you know, $360 million. OK, all right, I appreciate that color. I'll pass it on. Thanks.

Speaker 4: We're not going to comment on on negotiating discussions publicly. We don't do that and it'll be we'll let it play out the way it plays out and we'll be disciplined in the process. We follow every year and, you know, the appropriate time when we come to some agreement, you know, as we always do and the market knows, you'll see what our, our. Raw price is going to be for the next year. All right great.

We're not going to comment on.

Negotiating discussions publicly we don't do that and it'll be we'll let it play out the way it plays out will be discipline to the process. We follow every year.

And.

The appropriate time, when we come to some agreement as we always do and the market knows youll see what are raw prices going to be for the next year.

Alright, great. Thank you see you next week.

Thank you.

Speaker 2: And as a final reminder, that is star one if you would like to ask a question. We'll now take a question from William Ruder with Bank of America.

And as a final reminder, that is star one if you would like to ask a question.

I'll now take a question from William Reuter with Bank of America.

Matthew Smith: Well, now I'll take your next question from Matt Smith with people. Hi, good morning. Morning.

Speaker 15: Hi, just quickly to make sure on the last question, you contract for 75% in Europe , but that's 100% in North America, is that right?

Hi, Mike just quickly to make sure I'm on the last question you contract for 75% in Europe , but that's a 100% in North America is that right.

Tom Warner: I want to ask about the impact of walking away from low margin contracts in this mixed management you've been pursuing. That's way on volumes over the past couple of quarters. And you mentioned that the actions in the international segment in the US segment will be fully lapped by the by the fourth quarter. So, do you expect to be in a position to be growing volumes as you exit this year, meaning you've lapped those, you've lapped the drag from walking away from those contracts and you've made some progress on the backfill with higher margin.

That's correct.

Speaker 15: Okay, and then you have 20% of your contracts that are up for renewal. How does that compare to where you would have been last year or in a typical year?

Okay and then.

Then.

Yes, you have 20% of your contracts that are up for renewal, how does that compare to where you would've been last year or in a typical year.

Speaker 6: Yeah, typically we have about 25% up for renewal. So. Slightly down, but around average.

Yes, typically we have about 25% up for renewal, so slightly down but around average.

Speaker 15: Okay, and then just lastly for me, the elevated cathecs of 800 to 900 million, how should we think about that cathecs number over the next handful of years?

Okay and then just lastly for me the elevated Capex of 800 to 900 million.

Tom Warner: Yes, Max. I fully expect, as I said earlier, that in the back half of the year, we should start to see positive volume trends. And, you know, that's a function of lapping the exit of business, but also we have, you know, line of sight to additional business that we're going to start to backfill with. And that takes time. But I fully expect, based on how we've got the business forecast and the opportunities we have that we're going to start seeing positive volume trends in the back half.

How should we think about that capex number over the next handful of years.

Speaker 16: Yeah, so capex, you know, fluctuates year to year, as we've discussed in the past, we had a pent up demand after COVID, where we've had a couple years of higher spending. I'm going to speak more to that during investor day in terms of how to think about that over the next few years. So I'll go ahead and leave it for him yesterday. I assume that might have been the end of the presentation.

Yes, so capex fluctuate year to year as we've discussed in the past we had a pent up demand after COVID-19, where we've had a couple of years of higher spending I'm going to speak more to that during investor day in terms of how to think about that over the next few years. So I'll go ahead and leave it for Investor Day.

I assume that might've been the answer Okay. That's all for me. Thank you.

Yes.

Sure.

Speaker 2: And that does conclude our question and answer session. I'd like to hand the conference back over to Mr. Kogbelai for any additional or closing comments.

And that does conclude our question and answer session I would like to hand, the conference back over to Mr. <unk> for any additional or closing comments.

Speaker 3: Thanks for joining the call today. If you do plan on or want to come to our investor day, please shoot me an email and I can send you the invite if you haven't gotten it already. If you have gotten it and you do want to attend, since it's at the New York Stock Exchange, you do have to register in advance.

Thanks for joining the call today, if you do plan on or want to come to our Investor day.

Tom Warner: Okay, thank you for that. And maybe if I could ask one more question here. You mentioned that the capacity in China came online in the quarter. Do you have any update to the timing for the American Falls facility? Is that still expected to be on time for beginning production early in 2024? Yeah, we, we, you know, still expect in the late spring of 24 early summer for American Falls to transition to, you know, a vertical startup. And, and it takes some time to get the plan up and running, but absolutely late spring early summer. Thank you, Tom. I'll leave it there and pass on.

Unknown Executive: Thanks.

Please shoot me an E mail and I can send you the insight if you haven't gotten it already if you do have gotten it and you do want to attend.

Since this at the New York Stock Exchange you do have to register in advance. So you could put you on the list to get in.

Speaker 3: so we can put you on the list to get in. Any questions on the call today or kind of going forward, shoot me a note. We can set up some time. But again, thanks for joining the call, and we'll talk to you next week.

Any questions on the call today or.

We're kind of going forward should.

We know we can set up some time, but again, thanks for joining the call and we'll talk to you next week.

Speaker 2: And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.

And once again that does conclude today's conference. We thank you all for your participation you may now disconnect.

[music].

Robert Dickerson: Well, now take our next question from Rob Dickerson with Jeffries.

Unknown Executive: Okay, Robby might be on mute. You didn't respond will move on.

Robert Moskow: Okay, we'll now move on to Robert Moscow with TD. Thanks for the question. I hate to keep the magnifying glass on volume, but Tom, when you talk about positive volume in the back half, the way we had modeled it was that the easy comparisons to the wrong you walked away from really started in size and fourth and nothing third. So is that correct? And if so, can we expect positive volume in third as well, even though, you know, even though the, the volume walked away from may not have been as much.

Yeah.

Robert Moskow: Yeah, as it relates to the volume in our North America segment, I think I alluded to this fact that we started to walk away from that in third and fourth quarter in our international segment. We started to see the effect of what we exited in the fourth quarter of last year. So as we said, we do expect to see volume continue to improve both as we lap that business we exited as and as we bring on new business.

Robert Moskow: Okay, so is it premature to start dicing it up by quarter and just should we just think of it as the second half or could we say third quarter up? as well. Yep, so I would just think of it as the second half of the year.

Robert Moskow: Okay, I've got it. And then my other question and is, you know, I was hoping you'd give a little more color on like what percent of your contracts come up for renewal seasonally and also as it relates to like I think a lot of the industry is on three or contracts instead of one. So like how much is up for grabs in the next three to six months, just roughly speaking. Yeah, sure, Robert in our remarks, we got about 20% in play.

Robert Moskow: We feel confident about where we're at, where we're at in those discussions, how things are progressing for us this year. So we'll get through all that, you know, over the course of the year, we'll do, we'll give some color on what we've got coming up in terms of contracting for our next physical year and how that's progressing. But right now, you know, we've worked through most of it, feel good about where we're at, obviously it's all baked into our guidance. We have 20% in play, feel good about where it's at, commercial teams executing at a high level, great discussions, and you know, more to come on that.

Robert Moskow: And then, you know, the next, like we do, usually in our July call, we'll talk about what's what's coming up for contract renewal in the next physical year. Yeah, sorry, I was on the con agriculture. So 20% in play. And if it all kind of happened in the first part of me, nothing. All right, is it all in the first half, or is it like seasonally or is it just like kind of spread out across the year this year? Oh, typically, you know, it's, we start late spring through early fall when we start the contracting discussions. Early fall, okay. All right, thanks so much.

Andrew Lazar: Thanks, Robert. We'll now take our next question from Johnny Shamir with Barclays. Great. Thanks. Hey, guys. It's Andrew Lazar. Hope all is well. And I joined late as well, so I apologize if some of this was covered.

Tom Warner: But I think, Tom, I remember, I think last quarter, you started to talk a little bit about, you know, the plan sort of pivot, right, to a little bit more of a focus on profit dollars going forward. That's the way you obviously grow the business and you've had this significant margin recovery, you know, kind of much of which has already taken place. And that kind of makes sense, right, as you think about what you're looking to do.

Tom Warner: But I think there was some confusion and maybe some might have taken that to mean that, you know, as you move towards profit dollars that somehow you are expecting, you know, sort of ongoing or structural margin erosion going forward as some of the new capacity comes online. And, you know, that you'd have to sort of go after a lower margin business, somehow to, you know, fill that capacity. I was just hoping it may be, and maybe you'll give it to this a lot more obviously next week, but maybe just clarify a little bit of that because I do think there was some some confusion around that, you know, I logically understand, right, the shift, now the margins have kind of recovered to much more of a profit dollar focus. Thanks so much.

Tom Warner: Andrew, we're going to stay disciplined with our revenue growth management initiative. As we think about opportunities going forward, we are going to look at maintaining our margin profile and we're going to stay disciplined. And a testament of that is our decision to walk away from some of this lower margin business that we've been talking about. So it's all about maintaining a discipline and what we're going to focus on. We've worked really hard to rebuild our margin profile in this business and we're going to continue to focus on that and maintain our discipline around the margin structure. Thanks. See you next week. Yep, see you next week, Andrew.

Tom Warner: Well, now I'll take a question from Rob Dickerson with Jeff Reigns. Great, thanks so much. I was on mute. I just, I guess, a quick question for you, Tom, just, I guess, with respect to the China plant, like that, up and running, maybe coming back to Andrew's question a little bit, but ask it a little way. I'm just curious, like, actually, this business, you know, back into four, but now you have a new facility.

Tom Warner: You know, if you're now this conversation, you know, that you've been having, and now can be activated kind of with the sales force, such that you say, okay, there's foodie here, right? It's, you know, it's up, maybe off of our base, it's still up. There's not real demand destruction, you know, going forward that sounds like really expected, such that that sales force can actually go try to take, you know, material share.

Tom Warner: Let's say you've been on US markets, just kind of given the new facility first question. Yeah, so the China facility, we're in early, early stages of our startup, so it takes some time to get it up and running. We are running production there today. It's going to be specifically targeted for that market. You know, and we've got things identified in the China market from an opportunity and business standpoint, but it takes some time, you know, to get the plan up and running and efficient and kind of work the kinks out, but we're early on.

Tom Warner: So, you know, it's going to be several more quarters before we see the impact of that coming online. Sorry, fair enough. And then I just think you said Christmas song that, you know, traffic was up, I believe, midfielder in Europe. That was just QSRs, but I know traffic was up in Europe, something better than the US. Maybe just any kind of general perspective as to why that might be the case kind of, you know, market, we'd be market.

Tom Warner: Hey Rob, it's probably a little bit of, might have a little bit of softness last year, just just, you know, coming out of COVID and everything like that. But overall trends seem to be pretty good. I think with inflation still a factor, but it's cooling or at least a little bit better than expected, at least from the energy cost standpoint. So I think it was just a positive income helping traffic generate, or it was cooling up pretty well.

Tom Warner: All right, great. And then just quickly, you know, harvest something in line with the storage average is, you know, coming off two bad years, maybe just as a reminder, kind of, you know, when we start to see that 35% of COG maybe starts to disinplay, let's call it deflate year of year. It sounds like, you know, that might be what's like a back cat fiscal 25 dynamic. Yeah, Rob, so just a reminder, our cost and contract, raw input structure is baked.

Tom Warner: So, you know, wherever the crop yields and all that comes out, it really isn't going to impact our overall input costs for the balance of this physical year. You know, so it's, it's, you're not going to see any, any decline in our cost structure because the crop's great. It just, we agreed to a contract last year ago, and it is what it is. Yeah, that's right. And the only piece that's different in the European market is that generally will contract for about 75% whereas, you know, there's the open market for the remaining 25%.

Tom Warner: Then we've seen of late that the open market prices have started to come down. Right. But as we're even, I'm thinking all the way forward to, let's say, the end of, you know, backup and next fiscal year. Right. I'm assuming as we go into these contracts, you know, negotiations because toward the end of this calendar year, right. This is good. This year probably puts you in a pretty good position in this discussion.

Tom Warner: We're not going to comment on negotiating discussions publicly. We don't do that. And, you know, it'll be, we'll let it play out the way it plays out and we'll be disciplined in the process. We follow every year. And, you know, at the appropriate time when we come to some agreement, you know, as we always do.

Tom Warner: And the market knows you'll see what our raw price is going to be for the next year.

Tom Warner: All right. Great. Thank you. See you next week. Thank you. And as a final reminder, that is star one, if you want to ask a question, we'll now take a question from William Rooter with Bank of America. Hi. This quickly to make sure on the last question, you contract for 75% in Europe, but that's 100% in North America. Is that right? That's correct. Okay. And then you have 20% of your contracts that are up for renewal.

Tom Warner: How does that compare to where you would have been last year or in a typical year? Yeah, typically we have about 25% of for renewal. So slightly down, but around average. Okay. And then just lastly, for me, the elevated catbacks of 800 to 900 million, how should we think about that catbacks number over the next handful of years? Yeah. So catbacks, you know, fluctuate year to year. As we've discussed in the past, we had a pent up demand after COVID where we've had a couple years of higher spending.

Tom Warner: I'm going to speak more to that during investor day in terms of how to think about cat over the next few years. So I'll go ahead and leave it for investor day. I assume that might have been the answer. Okay, that's all for me. Thank you.

Unknown Executive: That does conclude our question and answer session.

Dexter Congbalay: I'd like to hand the conference back over to Mr. Congbalay for any additional or closing comments. Thanks for joining the call today. If you do plan on where I want to come to our investor day, please shoot me an email and I can send you the information you have gotten it already. If you do, if you have gotten it and you do want to attend, you know, since it's at the New York Stock Exchange, you do have to register in advance so you can put you on the list to get in. Any questions on the call today or kind of going forward. Shoot me a note. We can set up some time.

Unknown Executive: But again, thanks for joining the call and we'll talk to you next week.

Unknown Executive: And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect. Thank you.