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Company earningsNewsTruckingWarehouse

Americold’s outlook for temperature-controlled storage remains strong

The warehouse operator expects continued favorable demand tailwinds in 2020

Temperature-controlled warehouse operator Americold Realty Trust (NYSE: COLD) sees a healthy demand environment for cold storage continuing.

During its fourth-quarter 2019 earnings conference call, the Atlanta-based real estate investment trust’s (REIT) management team said it expects new facility development starts to be in the range of $75 million to $200 million during 2020. The company’s total project pipeline stands at $1.2 billion.

Further, management expects same-store warehouse revenue to increase 2-4% year-over-year in 2020 as there are “lots of occupancy opportunities” in their core markets, especially during peak produce seasons.

Management expects a continuation of the “strong” demand environment for temperature-controlled warehousing as consumption and population growth remain steady. Additionally, management said consumer preference continues to favor fresh and healthy food options that require cold storage.

Americold reported fourth-quarter 2019 core funds from operations (FFO) of 33 cents per share, 2 cents below analysts’ expectations.

Americold’s Key Performance Indicators

In the fourth quarter, Americold reported a 26% year-over-year increase in global warehouse revenue at $384 million. The average number of economic occupied pallets, or the total pallet space actually physically occupied or committed to its customers under contract, grew 20% to 3.2 million pallet positions. The occupancy rate of these pallets declined 60 basis points to 83.1% with revenue per pallet declining 19 cents to $49.99. Net operating income (NOI) contribution from the warehouse segment increased 29% to $130 million.

The bulk of the company’s growth came from prior acquisitions as warehouse revenue on a same-store comparison was slightly more than 3% year-over-year.

Americold made some large purchases in 2019. In May, the company acquired Cloverleaf Cold Storage in a $1.25 billion deal and announced an agreement to purchase Canadian-based cold storage facility operator Nova Cold Logistics in November for a little more than $250 million. That deal closed on Jan. 2.

In January, the company purchased an Upper Midwest temperature-controlled facility operator, Newport Cold Storage, for $56 million. In conjunction with Thursday’s financial report, Americold announced a 15% joint venture investment, $28 million, in SuperFrio Armazéns Gerais, a temperature-controlled storage operator in Brazil. SuperFrio operates 16 facilities with a combined total of 35 million cubic feet of refrigerated storage space.

Americold ended the year with $1.9 billion in total debt, $1.7 billion of which is real estate-related. The company’s primary debt leverage ratio — net debt to expected core earnings before interest, taxes, depreciation and amortization (EBITDA) including recent acquisitions — stood at 4.2x, slightly up from the end of the third quarter level of 4.1x.

The company ended 2019 with $1.4 billion in liquidity to pursue future acquisitions and facility projects.

For 2020, management’s guidance calls for adjusted FFO of $1.22-$1.30, compared to the current consensus estimate of $1.33 and the $1.17-per-share result it reported for full-year 2019.

Americold Realty Trust’s real estate portfolio includes 178 temperature-controlled facilities, including 11 facilities in its third-party managed segment, with more than 1 billion refrigerated cubic feet of storage in the United States, Australia, New Zealand, Canada and Argentina.

COLD Stock Price Chart – SONAR: STOCK.COLD

Todd Maiden

Based in Richmond, VA, Todd is the finance editor at FreightWaves. Prior to joining FreightWaves, he covered the TLs, LTLs, railroads and brokers for RBC Capital Markets and BB&T Capital Markets. Todd began his career in banking and finance before moving over to transportation equity research where he provided stock recommendations for publicly traded transportation companies.