The company expects the segment's year-over-year profit performance to improve in the second half of the fiscal year given the price increases under way, strong cost savings, lower SG&A, and accelerating contribution from innovation and recently acquired businesses.
Sales for the commercial foods segment were $1,057 million, 3 percent above $1,022 million in the year-ago period. The sales increase reflects improved volumes for Lamb Weston specialty potato products, as well as higher selling prices for the flour milling operations necessitated by higher wheat input costs.
Segment operating profit was $126 million, 16 percent below $151 million in the year-ago period. The operating profit decline reflects weaker margins at Lamb Weston, primarily due to selling and processing last year's high-cost, unusually poor-quality potato crop. The company also incurred start up costs at the new Delhi, La., sweet potato plant, which began operations during the quarter. The company finished its inventory of the old potato crop, and began processing this year's new, good-quality potato crop this quarter; fiscal second-half profits for the Lamb Weston specialty potato operations are on track for year-over-year improvement. Although still strong, flour milling profits were down from last year's high levels, as expected. Profits for the seasonings, blends, and flavors operations were in line with year-ago amounts, as planned.