Item 1A. Risk Factors
ITEM 1A. RISK FACTORS
We are subject to various risks and uncertainties in the course of our business. The discussion of these risks and uncertainties may be found under “Part I, Item 1A. Risk Factors” in the Form 10-K. There have been no material changes to the risk factors, other than as modified by the text below:
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Our business, financial condition and results of operations could be adversely affected by disruptions in the global economy caused by Russia’s invasion of Ukraine.
The global economy has been negatively impacted by increasing tensions related to Russia’s invasion of Ukraine. Such adverse and uncertain economic conditions may negatively impact consumer demand, cause supply chain disruptions and increase costs for transportation, energy, and raw materials. Furthermore, governments in the United States, United Kingdom and European Union have each imposed financial and economic sanctions on certain industry sectors and parties in Russia. We are monitoring the conflict and the potential impact of financial and economic sanctions on the regional and global economy. In addition, some customers, including our largest customer, McDonald’s Corporation, have paused operations in Russia, including through the temporary closure of restaurant locations.
Our Lamb-Weston/Meijer joint venture manufactures and sells frozen potato products in Russia through a separate joint venture. As a result of Russia’s invasion of Ukraine, the joint venture paused construction of its previously announced capacity expansion. While the joint venture continues to produce and sell food for domestic consumption, the current sanctions imposed by governments in the United States, United Kingdom, and European Union against Russia, as well as additional steps taken by the joint venture’s customers, suppliers, or other stakeholders, may disrupt the plant’s ability to operate. Increased trade barriers or restrictions on global trade also could adversely affect our business, financial condition, and results of operations. Though the proportion of our business directly attributable to Russian business through Lamb-Weston/Meijer is relatively small compared to our global operations, the destabilizing effects of Russia’s invasion of Ukraine could have other effects on our business. Further escalation of geopolitical tensions related to military conflict could result in loss of property, expropriation, cyberattacks, supply disruptions, plant closures and an inability to obtain key supplies and materials, as well as adversely affect our business and our supply chain, our international subsidiaries and joint ventures, business partners or customers in the broader region, including our European growing regions for potatoes. Lamb-Weston/Meijer operates processing facilities in Europe, including Austria, the Netherlands, Russia and the United Kingdom. In many instances, these sites depend on the availability of natural gas for use in the production of products, which may originate from Russia. Destabilizing effects that military conflict may pose for the European continent or the global oil and natural gas markets could adversely impact our ability to operate these facilities. In addition, the effects of military conflict could heighten many of our known risks described in Part I, Item 1A. “Risk Factors” in the Form 10-K.
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