Lineage said the cold storage market is still working through a supply overhang after the industry added too much capacity in response to the pandemic. It estimates the market is 10% overbuilt, noting it has idled some locations recently and that a few competitors are on the brink of shutting down.
Lineage (NASDAQ: LINE) ceased operations at 10 facilities last year and at 5 locations so far this year. The actions have idled 2.5 million square feet, or 1% of its U.S. portfolio. It said on a Wednesday quarterly call with analysts that some locations could come back online.
It plans to sell roughly $1 billion in assets, using the proceeds to deleverage the balance sheet (from 6x net debt-to-EBITDA to 5-5.5x). Management said supply rationalization will ultimately favor scaled providers with automation and transportation capabilities.
The company reported a net loss of $32 million for the second quarter on Wednesday before the market opened. Adjusted funds from operations (AFFO) of 76 cents per share came in 5 cents lower year over year.
Consolidated net revenue of $1.36 billion was 1% higher y/y and slightly ahead of the $1.35 billion consensus estimate.
On a same-warehouse comparison, physical occupancy was 75.8% in the quarter, 90 basis points better y/y, but 60 bps lower sequentially. Pallet throughput declined 2% y/y and storage revenue per pallet was down 1%.
A 14% y/y decline in food-related container volumes at the ports weighed on throughput. However, management said food inventories are stabilizing, noting some customers have indicated a need to rebuild stocks. Lineage expects normal seasonal demand patterns moving forward, which would result in a modest y/y decline in both pallet throughput and revenue per pallet. It reiterated its outlook for net pricing to increase by 1% to 2%.
Adjusted EBITDA of $320 million was 2% lower y/y, with the adjusted EBITDA margin dipping 60 bps y/y to 23.5%.
Lineage narrowed its full-year adjusted EBITDA guidance range to $1.26 billion to $1.29 billion, implying no change at the midpoint. It said a fire at a California facility will be a $15-million EBITDA headwind due to lost revenue and transition costs. (Lineage reported $1.3 billion in adjusted EBITDA in 2025.)
The company’s AFFO (per share) guidance range was raised to $2.80 to $3.05, 5 cents higher at each end of the range.
It has 20 facilities currently under construction, which will add $134 million in incremental net operating income.
Lineage manages 500 facilities with 3.1 billion cubic feet of space across North America, Europe and the Asia-Pacific region. It also provides freight forwarding, customs brokerage, drayage and truck transportation.
Shares of LINE were up 1.4% at 10:44 a.m. EDT on Wednesday compared to the S&P 500, which was up 0.4%.
Why it matters? Lineage is one of only two publicly traded cold storage providers. Its quarterly results provide a rare look at macro trends across the temperature-controlled warehousing and transportation markets.
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