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Lamb Weston Forms JV in Argentina, Expansion Plans on Track

Zacks Equity Research

Lamb Weston Holdings, Inc. LW has been striving to boost revenues through prudent partnerships and acquisitions. Per latest developments, the company announced a joint venture (JV) with Sociedad Comercial del Plata in Argentina. The move is likely to aid the company to expand footing in the South American market. Let’s take a closer look at this development and also discuss other initiatives by the company.

Efforts to Boost Market Reach Bode Well

Each partner will have a 50% ownership in the newly-formed JV — Lamb Weston Alimentos Modernos S.A. Per the terms of the JV, frozen potato products will be sold under the Rapipap and Morixe brands. The deal also includes operating a manufacturing facility in Munro, Buenos Aires, Argentina. The facility has an annual capacity of approximately 130 million pounds of finished goods.  

Lamb Weston expects that this deal will aid capturing greater revenue prospects in Argentina. Moreover, it will enable the company to cater to the growing needs of high-quality potato fries in the broader South American market.

Including the latest deal in Argentina, Lamb Weston now operates 27 manufacturing facilities worldwide, either independently or through joint ventures.  In previous development, the company acquired joint venture interests in Lamb Weston BSW. In fact, the BSW acquisition supported EBITDA and bottom-line growth during first-quarter fiscal 2020. Additionally, the company’s buyouts of Marvel Packers and Ready Meals, both based in Australia, have been yielding.

Speaking on capacity enhancement endeavors, the company has completed the expansion of a facility located at Hermiston, Oregon. This facilitated the addition of a new processing line for increasing the production of frozen french fries. Strengthening of this facility is expected to cater to rising demand in North America and key export markets as well as support production needs emerging from innovation and LTO’s.



Wrapping Up

Lamb Weston’s well-chalked efforts to bolster offerings through acquisitions and partnerships are encouraging. Moreover, the company is on track with pricing actions and improving supply-chain efficiencies to address certain cost-related hurdles in its manufacturing process. Markedly, such upsides have been boosting investors’ confidence in this Zacks Rank #3 (Hold) stock. Shares of the company have gained 12.8% in the past three months compared with the industry’s rise of 1%.

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The Estee Lauder Companies EL, with long-term earnings growth rate of 12.7%, carries a Zacks Rank #2.

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