Cold storage warehouse operator Lineage, Inc. provided an update on some longer-term initiatives after the market closed on Monday. It also provided an expected financial contribution from the increased adoption of its proprietary warehouse execution system, LinOS.
The Novi, Michigan-based company’s management team provided a market update to analysts and investors during a Monday call that was in line with commentary provided on its third-quarter call in early November. It said demand remains muted given high food costs, which are weighing on how much inventory its customers are willing to hold.
Lineage also said the temperature-controlled warehousing market has 9.5% excess capacity given recent facility additions. Square footage grew 10.5% across the industry from 2021 to 2024. Further, supply is expected to be up 4% this year and 1.5% higher next year. Surprisingly, occupancy across Lineage’s (NASDAQ: LINE) nearly 500-warehouse footprint, which touches approximately 30% of the calories consumed in the U.S., is down just 300 basis points from 2021 to 75%.
Lineage touted numerous initiatives designed to streamline operations and lower costs. Digital uniformity across warehouses, enhanced decision-making algorithms, an improved customer visibility platform (Lineage Link) and energy optimization efforts are some of the core strategies. The company also said it expects to generate $110 million in incremental annual EBITDA over the next three to five years as LinOS is rolled out to over 250 locations by 2029.
The LinOS decision-making system automates warehouse operations in real time. Improved routing on the warehouse floor is helping to maximize forklift operations. Inbound and outbound pallet moves are now paired more than 40% of the time.
High-reach-operations pilots at 11 locations have produced a more than 30% improvement in hourly movements and a 5% reduction in total labor per throughout pallet. Similar case pick and dock modules are in the works. Lineage said a 10% reduction on $1 billion in warehouse labor spend along with incremental value-added services revenue will generate a $110-million increase in EBITDA. (The company reported last-12-months adjusted EBITDA of $1.3 billion.)
Lineage has invested $250 million in LinOS and has another $200 million committed through 2030. The return on invested capital for the project is forecast at 24%. Lineage attributed some recent contract wins to the technology.
Shares of LINE closed on Monday at $34.69. The stock debuted on the Nasdaq at $82 per share in the summer of 2024. The IPO raised $4.4 billion in proceeds and valued the company at nearly $19 billion at the time.
Lineage manages 488 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.
