Moody's downgrades Lamb Weston

Moody's Investors Service said it lowered Lamb Weston Holdings, Inc.'s corporate family rating to Ba2 from Ba1 and probability of default rating to Ba2-PD from Ba1-PD. The agency also downgraded Lamb Weston's senior unsecured notes from Ba2 to Ba3. The speculative grade liquidity rating was changed to SGL-3 from SGL-1.

“The downgrade reflects Moody's view that fiscal 2022 earnings will be lower than previously expected, leading to elevated leverage. Although Lamb Weston is experiencing an increase in sales as demand from quick service (QSR) and other restaurants rebounds, the company is also facing inflationary headwinds in the form of higher canola oil costs and higher transportation costs that are having a significant negative impact on gross margins. In fiscal 2022, management expects that these cost pressures could have between a 500 basis points-800 bps impact on gross margin,” the agency said in a press release.

Moody’s said inflation could push Lamb Weston’s Moody's adjusted gross debt/EBITDA above 5x in the next 12 months.

The outlook is stable.

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