WESTERVILLE, OHIO — Lancaster Colony Corp. has decided to push back the implementation of Project Ascent until the start of fiscal 2023, citing a wide range of factors. The initiative, which Lancaster began working on in the fourth quarter of fiscal 2019, will allow the company to replace its current ERP system that was installed in 1995. The company originally expected the project to take about two years to implement.
During an Aug. 26 conference call with analysts to discuss fiscal 2021 results, David A. Ciesinski, president and chief executive officer of Lancaster, was asked about the decision to defer the implementation and to highlight the potential impact on cost savings.
Mr. Ciesinski began his response by noting that the main reason for deferring is “everything that you’re seeing out there in the news today.”
“It’s the amalgam of labor uncertainty and broad global supply chain uncertainty, end-to-end volatility in demand that’s coming by way of our customers,” he explained. “One period, they are way up, and in another period, they’re backing off. And all of that uncertainty and the fact that our foodservice customers, in particular, like Chick-fil-A, rely on us in many cases exclusively, we felt that it wasn’t prudent to lean in and hope that we could get that project to go live only to find ourselves in a set of circumstances where we couldn’t supply our customers. So really after some pretty extensive consultation with our customers and our internal team, we sat back and we looked at sort of where we are as a country and where we are in the food industry today, and we just felt like end-to-end fiscal year ’22 is just probably too volatile for us to pick a window.”
Mr. Ciesinski said Lancaster is very well aware of the impact that the COVID Delta variant is starting to have on the supply chain. With many manufacturers dealing with labor issues it has created a volatile mix. For its part, Lancaster is focused on winning in the long run, he said.
“We feel uniquely positioned with a strong P&L and a very strong balance sheet, a strong portfolio of customers,” he said. “We want to make sure that we’re leveraging all of those to set ourselves up for not just a good quarter or a couple of good quarters, but really multiple years of a successful run, so that’s really what set up the decision for us just to look across the horizon and say, when does it make sense for us to park this and to take that decision.
“So then with the benefit of that time, we said, okay, what do we want to do? And how do we want to use this time incrementally? And what we’ve elected to do is to pull forward some of the enhancements that we would have been working on in subsequent periods and rework the — sort of the deployment schedule to make sure that we’re making optimal use of this time.
“And in other cases, honestly, we’ve taken people that were on the project. And as we’ve had short-term issues that have arisen in the business, it’s allowed us to flex our own internal labor out into the business to manage through some of these — the ups and downs and puts and takes that we’re seeing every day. But I guess what I would want to convey to you is we remain absolutely committed to the importance of the initiative, and we feel like we’re well positioned to put it in place. But as an old boss told me one time, there’s no long term without the short term. And we wanted to make sure that we didn’t set ourselves in a position where we made a bad choice. We’ve burned one or more of our customers, and it really took us off our growth trajectory.”
Overall, net income at Lancaster in the year ended June 30 totaled $142.33 million, equal to $5.17 per share on the common stock, up 3.9% from $136.98 million, or $4.98 per share, in fiscal 2020. Net sales rose 9.9% to $1.47 billion from $1.33 billion in the same period a year ago.