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New Americold CEO faces tough questions on recent performance

2022 guidance calls for another year of declining results

Nothing held back on Q4 Q&A (Photo: Jim Allen FreightWaves)

Labor headwinds and COVID-related work outages have crimped food production across the globe, a trend that has spilled into the new year. The declines are weighing on the financial results of cold storage facility operator Americold Realty Trust.

Americold (NYSE: COLD) reported fourth-quarter 2021 adjusted funds from operations (AFFO) of 31 cents per share, 16% lower year-over-year. Core FFO beat analysts’ expectations by a penny. The company booked a net loss of 3 cents per share in the period.

Global warehouse revenue increased 36% year-over-year to $554 million. Acquisitions, expansion projects and higher market rates drove the increase. Americold operated 12 more facilities in the period, a 5% increase from the year-ago quarter. Throughput pallets were 25% higher, with rent and storage revenue per pallet up 8%.

Stripping out acquisitions and changes in foreign exchange rates, the metrics were more muted. Warehouse revenue was up only 3% as throughput pallets were off slightly more than 1% and rent and storage revenue per pallet was up just 5%.

“As in many other labor-intensive industries, labor availability continues to be a challenge for our food production customers, which negatively impacts their production levels,” new CEO George Chappelle stated on a call with analysts Thursday evening. “This in turn negatively impacts our economic and physical occupancy as well as throughput volumes.”

In a separate press release also issued after the close Thursday, Americold named Chappelle the permanent CEO, to the surprise of analysts. He assumed the role on an interim basis in November when the previous president and CEO, Fred Boehler, was terminated abruptly.

Rising costs have continued to outpace the speed at which rate increases can be implemented. Segment net operating income was 4% higher year-over-year at $151 million. On a same-store basis and excluding fluctuations in foreign exchange rates, NOI contribution was down 8%.

Seventy percent of Americold’s warehouse revenue is generated from its top 100 customers. Half of those contracts allow for rate adjustments as long as Americold can show a “demonstrable increase in costs.” The other half of the contracts require good faith negotiations. It usually takes 60 days of elevated costs before the rate hike measures begin.

Thirty percent of warehouse revenue comes from smaller customers whose rates can be raised at any time as long as 30 to 45 days’ notice is provided.

Many of the recent price increases were reflected in results during the fourth quarter. The remainder will show up in first-quarter results.

Service revenue per throughput pallet on a same-store comp was only 3.8% higher year-over-year in the quarter. However, the metric increased to plus-5.9% year-over-year in December as the rate increases took hold.

Management said there were “no material changes” to its top 25 customers, which account for 49% of global warehouse revenue (on a pro forma basis). Customer churn was 3.3% of warehouse revenue. Management said the bulk of the deceleration in trends during the quarter was tied to lower food production, which resulted in less usage of space.

Economic occupancy was down 140 basis points in the quarter to 77.8%.

Table: Americold’s key performance indicators

“Once labor normalizes, we are confident inventory will return to historic norms,” Chappelle added. He estimates the omicron outbreak, which increased absenteeism, has delayed a labor recovery by three to six months.

The company guided to AFFO of $1 to $1.10 per share for 2022, which would be a decline from $1.15 in 2021 and $1.29 in 2020. Same-store warehouse revenue is expected to be flat to down 2% year-over-year (constant currency), and occupancy is expected to step 100 bps to 200 bps lower during the year.

Management’s guidance implies a nearly $40 million step up in selling, general and administrative costs, more than half of which is tied to future performance-based comp as well as $11 million in equity retention grants. 

Analysts questioned the pay bump given that the stock has declined 33% since July (S&P 500 only 1% lower over that period). Management said the increase is required to retain talent throughout the network. The remaining portion of the $40 million is tied to systems integrations and general cost inflation. 

Chappelle appointment to permanent CEO surprises analysts

Analysts on the call were surprised to hear Chappelle has stepped into the CEO role on a permanent basis after he previously said he was not a candidate. The reaction appeared less centered on his credentials and more on his quick about-face to return to the workforce following a brief retirement.

Chappelle has 35 years of experience in the food and beverage and consumer packaged goods industries, previously holding leadership roles with Tyson Foods, The Kraft Heinz Co. and Sara Lee Foods. He was also chairman of the board at AGRO Merchants Group, which was acquired by Americold for $1.74 billion in late 2020. At the time, Agro was the world’s fourth-largest cold storage provider.

He was one of three new board members named when Boehler was dismissed.

Chappelle said he’s focused on improving labor management and will look to raise the percentage of permanent workers throughout Americold’s facility network, which he said results in better productivity and lower costs.

Customer service is a top priority as well. He will push to make sure service returns “not only to pre-COVID levels, but best in class.” He also wants to see the company’s development projects remain on track, citing macroeconomic conditions and supply chain issues as ongoing threats.

Americold has $100 million to $200 million slated for development projects in 2022.

Pressing on Americold’s service issues and financial performance, one analyst asked Chappelle if Agro had made a mistake selling to Americold and if that was the reason he came out of retirement.

“I don’t think Americold has been run poorly, just to be perfectly clear,” Chappelle answered. “The macroeconomic environment driven by COVID and unavailable labor, something I’ve never experienced in my career, I’ve experienced high-cost labor before, I’ve never experienced unavailable labor to this degree. I think that’s what has really impacted service levels. That’s what is really disrupting companies. … Americold is not immune to those macroeconomic issues.”

The company ended 2021 with $803 million in total liquidity and total debt of $3.1 billion, the bulk of which is tied to real estate. Including EBITDA expectations from recent acquisitions, net debt-to-pro forma core EBITDA ended the year at 6.1x, up from 4.4x at the end of 2020.

Americold owns and operates 250 cold storage facilities (nine in its third-party managed segment), with 1.5 billion cubic feet of space in North America, Europe, Asia-Pacific and South America.

Click for more FreightWaves articles by Todd Maiden.

Watch: What could inflation look like?


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    It’s just a poorly ran, poorly managed, company with poor customer service. Anyone there that I have to speak with has an awful attitude.

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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.