Yahoo Finance ConAgra (CAG) to Expand Lamb Weston, Divest JM Swank
ConAgra Foods, Inc. CAG recently announced its decision to spin-off its JM Swank business and expand its Lamb Weston operations at the Richland, WA facility. We expect these strategic moves to boost the company’s revenues and margins in the near future.
ConAgra’s Lamb Weston business is a premium manufacturer of high quality sweet potato, frozen potato, vegetable products and appetizers. According to media reports, the demand for frozen potato category is likely to grow to roughly 2.6 billion by 2020. Higher demand for frozen French fries is expected to drive the upside in the category.
To this end, ConAgra has decided to enhance its Lamb Weston processing capacity by expanding its operations in the Richland facility. The company’s existing Lamb Weston facility in Richland was built in 1972 and has a workforce of roughly 500. ConAgra has invested more than $200 million to boost the facility’s productivity by adding up a new processing line for French fries. The expansion is expected to add up full-time employment scopes for another 128 individuals and is estimated to enhance the facilities’ productivity by more than 300 million pounds.
Expansion of the Lamb Weston facility should bolster ConAgra’s revenues in the near term. Notably, the company finances initiatives such as this by advantageously increasing its liquidity through appropriate cost-saving plans and tactical business divestiture.
The company recently entered into a definitive deal to sell its JM Swank business to the Californian private equity company, Platinum Equity. The financial details of the deal were not disclosed. JM Swank is a national food ingredient distribution and sourcing company of ConAgra. The move reflects the company’s intention to boost shareholders’ value and reinforcing product portfolio in the near term. Notably, JM Swank would remain an important customer and supplier of ConAgra post the divestiture.
This Zacks Rank #2 (Buy) stock is known for strategically boosting its financial fundamentals via tactical divestitures, lucrative acquisitions, product portfolio solidification as well as operational efficacy.
Other Stocks to Consider
Other favorably placed stocks in the industry include B&G Foods Inc. BGS, Lancaster Colony Corporation LANC and Post Holdings, Inc. POST. All the three stocks currently sport a Zacks Rank #1 (Strong Buy).
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