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Lamb Weston's (LW) China Investment to Fuel Production Capacity

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Zacks Equity Research
·4 min read
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Lamb Weston Holdings, Inc. LW has been focused on expanding capacity to aid growth. Progressing on these lines, it unveiled plans to expand the french fry processing capacity in China, which is a crucial market for the company. This investment, which is likely to be worth nearly $250 million, reflects Lamb Weston’s focus on its strategic customers.

Apart from this, the company declared a quarterly dividend of 23.5 cents per share, which is payable on Jun 4, 2021, to shareholders of record as of May 7.

Capacity Expansion on Track

Lamb Weston unveiled plans to build a new french fry processing facility in Ulanqab, Inner Mongolia, China, which is likely to generate nearly 280 full-time job positions. Construction of this facility, with a capacity to produce more than 250 million pounds of frozen french fries as well as other potato products per year, is anticipated to be concluded in Lamb Weston’s first half of fiscal 2024. This will be an addition to the company’s existing production capacity in China, which is the facility in Shangdu, Inner Mongolia.

Earlier this month, the company announced that its branded french fries are now available in Mercosur. Notably, its joint venture with Sociedad Comercial del Plata in Argentina, called Lamb Weston Alimentos Modernos S.A. (AMSA), will bring the Lamb Weston brand to foodservice across the region. We note that Alimentos Modernos has been manufacturing good quality french fries for more than 30 years in Argentina. This partnership will help Lamb Weston provide local items, along with export specialties from across the globe, to the almost 900,000 MT Latin American market.

Certainly, Lamb Weston is committed to undertaking initiatives to boost offerings and operating capacity. These efforts enable the company to effectively meet the rising demand for snacks and fries. Speaking of capacity expansion endeavors, the company completed the expansion of a facility located in Hermiston, OR, on Jun 18, 2019. The expansion has facilitated the addition of a new processing line for increasing the production of frozen french fries.

Moving to acquisitions, the company completed the buyout of joint venture interests in Lamb Weston BSW sometime around mid-fiscal 2019. Among other moves, the company acquired Australia-based companies, Ready Meals and Marvel Packers, in 2019 and 2018, respectively. These buyouts have bolstered Lamb Weston’s market share in Australia.

Wrapping Up

Lamb Weston boasts a strong global presence as it serves many quick-service restaurants. Also, it is recognized as one of the largest frozen french fry manufacturers worldwide. The company along with its joint ventures runs 27 production plants globally. The Zacks Rank #3 (Hold) company’s shares have gained 19.5% in the past six months compared with the industry’s rise of 11.3%.

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