Cold storage sees choppy Q2; Americold says business ‘stable’

Aerial of Americold facility

Management from food supply chain warehouse operator Americold Realty Trust (NYSE: COLD) said on its Thursday evening earnings call with analysts that business is stable and demand remains consistent.

The Atlanta-based real estate investment trust (REIT) said demand from quick-service restaurants has picked up but overall food service activity remains pressured and below historical norms. They said all of their customer protein manufacturers have reopened but are not yet back to operating at full capacity.

In a press release after the market close, the company reported core funds from operations (FFO) of 27 cents per share, 3 cents shy of the consensus estimate and the second-quarter-2019 result. Adjusted FFO was 32 cents per share excluding $4.3 million in bonuses paid to front-line workers during the pandemic.

Americold reported a 10% year-over-year revenue increase to $483 million given past acquisitions, “ongoing elevated retail activity” and rate increases. The company’s recent acquisitions include the $1.25 billion purchase of Cloverleaf Cold Storage and the more than $250 million deal for Canadian-based cold storage facility operator Nova Cold Logistics.

Throughput pallets were down 3.1% year-over-year on a same-store comparison, up 4.8% inclusive of acquisitions. Rent and storage revenue per pallet increased $1.37 to $52.64, holding currency fluctuations constant.

Americold’s key performance indicators

Management sees ample opportunity within its portfolio, noting they have sold most of the future pallet positions on expansion projects in Chicago, Atlanta and New Zealand.

The company recently announced plans for two new facilities in Connecticut and Pennsylvania for Ahold Delhaize USA (Koninklijke Ahold Delhaize OTCUS: ADRNY), the largest retail grocery group on the East Coast. The $325 million project broke ground in the second quarter of 2020 with plans to be fully operational in 2023.

Americold had $1.2 billion in total liquidity at the end of the second quarter with total debt of $2 billion, $1.8 billion of which is tied to real estate. The company’s net debt-to-core earnings before interest, taxes, depreciation and amortization (EBITDA), including anticipated contributions from acquisitions, was 4.1x.

In the second quarter, the company issued 3.1 million new shares of common stock under its at-the-market (ATM) equity program. The transaction raised $110 million in proceeds during the quarter. Americold entered into a forward sale agreement for an additional $17 million issuance between now and July 2021. The proceeds will be used to fund acquisitions and expansion projects.

While the venue where food is consumed has changed, management said their operating model remains consistent: They see temperature-controlled storage as key to the food supply chain as “people are still going to eat.”

Americold Realty Trust’s real estate portfolio includes 183 temperature-controlled facilities, including 11 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.

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