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Americold ups 2023 outlook following cyberattack

Warehouse operator Americold Realty Trust raised its full-year outlook even as it contends with a recent cyberattack. The company said customers have increased food production and need more cold storage space, which is driving financial results higher.

Americold (NYSE: COLD) reported first-quarter adjusted funds from operations (AFFO) of 29 cents per share, which was 3 cents higher year over year (y/y). Core FFO beat analysts’ expectations by a penny. The company booked a net loss of 1 cent per share in the period.

A cybersecurity incident at the end of April impacted 30% of its facilities, temporarily halting throughput. Little details have been provided but management told analysts on a Thursday evening call that all product at those sites continued to be stored at appropriate temperatures.

The event continues to impact 15% of the company’s sites.

Warehouse revenue increased 10% y/y in the first quarter to $595 million. Pallet throughput dipped 2% but services revenue per pallet was 8% higher.

Occupancy for contractually committed space moved 720 basis points higher to 84% (84.6% on a same-store comparison). Management said that was an all-time high for any first quarter and well above normal seasonal trends. Higher food production and an increase in the percentage of fixed commitment storage contracts were the primary drivers.

Americold’s customers are now getting back to normalized production rates following the pandemic as labor availability is less of an issue.

“We have a blue-chip manufacturing customer base,” CEO George Chappelle told analysts on the call. “When they can turn on production, it comes fast and it comes in big numbers.”

Looking forward, the company is confident occupancy will step higher as the first half of any year is usually the low point. A low-90% rate was said to be achievable in time.

Americold is also benefiting from improved labor availability. Its permanent workforce stood at 75% in the period, a 9-percentage-point increase from a year ago.

The company said it takes approximately three months to bring a new hire up to speed.

Consolidated net operating income contribution increased 19% y/y to $188 million. The NOI margin was up 530 bps to 27.7%.

Table: Americold’s key performance indicators

Americold’s new full-year AFFO guidance of $1.16 to $1.26 was raised by 2 cents at each end of range. Warehouse revenue is expected to increase by 4.5% to 8.5% on a same-store comp, excluding currency fluctuations. The growth rates will step down following a 12.3% increase in the first quarter.

Throughput volumes are expected to decline 1% to 3% during the year “as end consumer demand continues to slow and basket sizes shrink due to the current economic environment,” CFO Marc Smernoff said. However, rent and storage revenue per pallet should increase 5.5% to 7.5%.

“Given these operating metrics, we are continuing to accelerate the underwriting process and evaluating development opportunities, which includes a mix of expansion and greenfield projects, customer dedicated and major market distribution centers and conventional and automation facilities,” said Chief Commercial Officer Rob Chambers.

Americold has $100 million to $200 million slated for development projects this year.

During the quarter the company completed an 11.4 million-cubic-foot dedicated customer facility in Lancaster, Pennsylvania. The $164 million project houses 28,000 pallet positions.

Management didn’t commit to a price tag for the cyberattack but said the event is weighing on throughput volumes and has increased labor and operational costs.

On the potential threat of losing customers due to the security event: “We definitely recognize that there’s going to be a need coming out of this to spend quite a bit of time with our customers, walking them through the investments that we have made and that we’ll continue to make and talk more broadly about what we can do to minimize the impact of this and share lessons learned because these are the things that can also happen to our customers or any of our competitors,” Chambers said.

However, he said he doesn’t expect much customer churn.

Americold owns and operates 243 cold storage facilities with 1.5 billion cubic feet of space in North America, Europe, Asia-Pacific and South America.

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