Americold Realty Trust, Inc. (NYSE: COLD) is a global leader in temperature-controlled logistics, real estate, and value-added services. The company owns and operates 241 temperature-controlled warehouses globally, totaling around 1.5 billion cubic feet, with a presence in North America, Europe, Asia-Pacific, and South America.

Business Overview

Americold's business is organized into three primary segments: Warehouse, Transportation, and Third-Party Managed. The Warehouse segment generates the majority of the company's revenue and profits, providing rent, storage, and a wide array of value-added services such as order retrieval, packaging, and blast freezing. The Transportation segment offers freight and logistics services, while the Third-Party Managed segment earns fees for managing warehouses on behalf of third-party owners.

Consistent Organic Growth Amidst Challenging Conditions

Despite a challenging macroeconomic environment, Americold has demonstrated its ability to drive consistent organic growth across its platform. In the first quarter of 2024, the company reported AFFO of $104.9 million, or $0.37 per share, representing a 28% increase on a per-share basis year-over-year. This strong performance was driven by significant improvements in the company's same-store services margins, which reached a record 10.7% in the quarter, a 671 basis point improvement from the prior year.

The company's laser focus on customer service, labor management, and pricing initiatives have been key drivers of its organic growth. Americold has made substantial progress in migrating customers to fixed commitment storage contracts, which now account for 54.2% of rent and storage revenue, up 200 basis points from the prior quarter and 24% higher than the first quarter of 2023. These fixed commitment contracts help smooth out the seasonality in Americold's business and serve as a leading indicator of future volume growth.

Americold has also made significant strides in improving its labor management, with its perm-to-temp hours ratio reaching a record 78:22, a 3 percentage point improvement year-over-year. Additionally, the company's associate turnover has declined to pre-COVID levels, and the percentage of associates with less than 12 months of service has improved 300 basis points since the prior quarter, approaching the pre-COVID level of 23%.

These operational improvements, coupled with the company's pricing initiatives, have driven strong same-store performance. In the first quarter, same-store rent and storage revenue per economic occupied pallet increased 3.9% on a constant currency basis, while same-store services revenue per throughput pallet rose 10.8%, both driven by pricing actions taken in the second half of 2023 and annual contractual rate increases.

Strategic Partnerships and Development Activity

Americold continues to execute on its strategic growth initiatives, including partnerships with industry leaders CPKC and DP World. The company recently broke ground on a $127 million project with CPKC in Kansas City, which will deliver unique value-add services, and a $35 million project with DP World in Dubai to support the local market and surrounding area redistribution. Additionally, Americold announced a new $36 million expansion project in Sydney, Australia, anchored by a large Australian retailer.

These strategic partnerships and development projects demonstrate Americold's ability to create value by leveraging its global temperature-controlled infrastructure and expertise. The company expects its investment in these partnerships to grow significantly over the next few years, with a potential development pipeline of $500 million to $1 billion.

Financials

Americold maintains a strong financial position, with total net debt outstanding of $3.2 billion and total liquidity of $732.5 million as of the end of the first quarter. The company's net debt to pro forma core EBITDA ratio was approximately 5.4x.

For the full year 2024, Americold has increased its AFFO per share guidance to a range of $1.38 to $1.46, representing an approximately 12% increase from 2023's AFFO per share result. This guidance reflects the company's ability to drive organic growth through improvements in productivity, labor management, and pricing, as well as its effective management of variable costs.

Risks and Challenges

Americold's business is subject to various risks, including rising inflationary pressures, labor shortages, supply chain disruptions, and the potential impact of economic conditions on consumer demand. However, the company's focus on operational excellence, strategic partnerships, and disciplined capital allocation have positioned it well to navigate these challenges and continue delivering consistent organic growth.

Conclusion

Overall, Americold's strong first-quarter performance, strategic initiatives, and updated guidance demonstrate the company's ability to generate value for shareholders even in a challenging environment. The company's focus on customer service, labor management, and pricing, coupled with its strategic growth projects, position Americold for continued success in the temperature-controlled logistics industry.