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Lamb Weston (LW) Expands French Fry Capacity to Fuel Growth

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Lamb Weston Holdings, Inc. LW is on track to strengthen production network to effectively meet rising demand for its products worldwide. The company took another step in this direction as it announced the expansion plan of french fry processing capacity at its existing American Falls, ID facility.

Apart from this, the producer, distributor and marketer of value-added frozen potato products is committed toward returning wealth to its shareholders’ through dividend payments. Lamb Weston announced a quarterly dividend of 23.50 cents per share, payable on Sep 3, 2021 to shareholders of record as on Aug 6. The company has a dividend payout of 55%, a dividend yield of 1.3% and a free cash flow yield of 3.5%. With an annual free cash flow return on investment of 11.9%, the dividend payment is likely to be sustainable.

Zacks Investment Research
Zacks Investment Research

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More on Capacity Expansion

Lamb Weston revealed its plans to build a new french fry processing line at its facility in American Falls with an envisioned capacity to manufacture more than 350 million pounds of frozen french fries and other potato products annually. The planned construction is likely to be finished by the middle of 2023. The construction along with modernization of the existing unit is expected to cost nearly $415 million. Management anticipates adding almost 130 new jobs by this move.

Speaking on other capacity expansion endeavors, the company unveiled plans to build a new french fry processing facility in Ulanqab, Inner Mongolia, China in March 2021. Construction of this facility is anticipated to be concluded by the first half of fiscal 2024. This will be an addition to the company’s existing production capacity in China, which is the one in Shangdu, Inner Mongolia. The company is also on track with capacity expansion in Russia via its European joint venture, Lamb-Weston/Meijer.

Lamb Weston completed the expansion of a facility located at Hermiston, Oregon on Jun 18, 2019. The expansion facilitated the addition of a new processing line for increasing the production of frozen french fries. This is helping the company cater to demand in North America and key export markets as well as support production needs emerging from innovation and limited time offerings.

Management has been undertaking acquisitions to effectively meet high demand for snacks and fries. Lamb Weston completed the acquisition of joint venture interests in Lamb Weston BSW sometime around mid-fiscal 2019. The company also acquired Australia-based companies Ready Meals and Marvel Packers in 2019 and 2018, respectively. These buyouts have bolstered its market share in Australia.

The Zacks Rank #2 (Buy) company’s dedicated efforts to bolster its capacity, positions it well to capture market share in the growing global french fry market. Shares of Lamb Weston have increased 10% in the past year compared with the industry’s 12.9% growth.

Some More Better-Ranked Food Picks

Darling Ingredients Inc. DAR, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 29.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Tyson Foods, Inc. TSN, currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 39.1%, on average.

Medifast, Inc. MED, currently carrying a Zacks Rank #2, has a trailing four-quarter earnings surprise of 12.7%, on average.

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