Business Overview and History
Americold Realty Trust, Inc. (COLD) is a global leader in temperature-controlled logistics, real estate, and value-added services. The company focuses on the ownership, operation, acquisition, and development of temperature-controlled warehouses. With a vast network of 239 warehouses across North America, Europe, Asia-Pacific, and South America, Americold has established itself as a premier provider of cold storage solutions.
Americold Realty Trust was founded in 1931 as a Maryland corporation and has since grown to become a global leader in temperature-controlled storage, logistics, real estate, and value-added services. The company operates as a real estate investment trust (REIT) for U.S. federal income tax purposes, focusing on the ownership, operation, acquisition, and development of temperature-controlled warehouses.
Throughout its history, Americold has pursued both organic growth and strategic acquisitions to expand its market presence. In 2020, the company made a significant move by acquiring Agrofundo Brazil II Fundode Investimento em Participações, also known as the Comfrio joint venture, to strengthen its foothold in Brazil. However, in 2023, Americold divested its outstanding minority ownership in the LATAM joint venture, demonstrating its ability to adapt its strategy to changing market conditions.
In April 2023, Americold faced a significant challenge when a cybersecurity incident impacted several of its systems and operations. The company responded swiftly by engaging external experts to investigate and address the issue. Despite the temporary disruption, Americold was able to resume full operations by the end of the second quarter of 2023, showcasing its resilience and ability to overcome unexpected obstacles.
In recent years, Americold has placed a strong emphasis on operational effectiveness and cost structure improvements. The company has invested in various initiatives aimed at streamlining business operations, reducing facility costs through energy efficiency projects, and successfully integrating acquired assets and businesses. These efforts have played a crucial role in maintaining Americold's position as a global leader in the temperature-controlled storage and logistics industry.
Today, Americold operates a diversified portfolio of temperature-controlled warehouses, offering a wide range of value-added services such as blast freezing, ripening, and e-commerce fulfillment. The company's global network of facilities boasts a total capacity of approximately 1.4 billion cubic feet, catering to the needs of some of the world's largest food manufacturers and grocery retailers.
Financial Overview
Americold's financial performance has been impressive, with the company consistently generating robust revenue and profitability. In the latest reported quarter (Q3 2024), the company generated revenue of $674.17 million, representing a year-over-year increase of 0.9%. However, earnings per share (EPS) for the same period came in at $0.35, slightly below the consensus estimate of $0.36.
The company's balance sheet remains strong, with a net debt position of $3.5 billion as of the end of the third quarter of 2024. Americold's total liquidity, including cash on hand and available revolving credit, stood at approximately $922 million, providing ample flexibility to fund its growth initiatives.
One of the key financial metrics that has drawn attention is Americold's same-store net operating income (NOI) growth. In Q3 2024, the company reported a 11% increase in same-store NOI compared to the prior year, demonstrating its ability to drive operational efficiency and profitability within its existing portfolio.
Moreover, Americold has maintained a disciplined approach to capital allocation, with a focus on strategic development projects and targeted acquisitions. The company's development pipeline exceeds $1 billion, with a mix of partner-driven initiatives, customer-dedicated expansions, and strategic market expansions.
For the third quarter of 2024, Americold reported the following financial results:
Revenue: $666,435,000
Net income: -$36,215,000 Operating Cash Flow: $162,605,000 Free Cash Flow: $57,404,000
The company saw year-over-year revenue growth of 0.9% in Q3 2024, driven by increased pricing and customer demand, partially offset by lower physical occupancy. Net income declined year-over-year due to increased operating costs and expenses.
Business Segments
Americold operates three primary business segments: Warehouse, Transportation, and Third-Party Managed.
Warehouse Segment
The Warehouse segment is Americold's core business, generating the majority of its revenues and profits. This segment includes revenues and costs related to the storage and handling of frozen, perishable or other products in Americold's temperature-controlled warehouses. Rent and storage revenues are earned from customers who store their goods in Americold's facilities, while warehouse services revenues come from value-added activities such as order fulfillment, blast freezing, and other specialized services.
On a constant currency basis, the Warehouse segment's revenues increased 3.3% year-over-year for the nine months ended September 30, 2024, driven by a 3% increase in the same-store pool and a 5.9% increase in the non-same-store pool. Warehouse segment contribution NOI, which excludes certain corporate expenses, increased 15.9% on a constant currency basis, reflecting strong margin expansion. The same-store rent and storage contribution NOI margin increased 50 basis points to 62.1%, while the same-store services contribution NOI margin grew 1,005 basis points to 12.8%. These improvements were driven by higher customer pricing, improved revenue capture, and operational efficiencies.
Transportation Segment
Americold's Transportation segment generates revenues and incurs costs related to the transportation of customers' products, often including fuel and capacity surcharges. On a constant currency basis, Transportation segment revenues decreased 10% year-over-year for the nine months ended September 30, 2024, primarily due to lower volumes associated with the transition of certain UK operations to a third-party logistics model, the loss of a major US customer, and softening demand in the broader macro environment. Transportation segment contribution NOI decreased 4.8% on a constant currency basis, in line with the revenue decline.
Third-Party Managed Segment The Third-Party Managed segment encompasses Americold's services for operating temperature-controlled warehouses owned by third-party customers. Americold earns revenues through reimbursements for expenses incurred, as well as management and incentive fees. On a constant currency basis, Third-Party Managed segment revenues decreased 8% year-over-year for the nine months ended September 30, 2024, while segment contribution NOI increased 57.5%, driven by operational and pricing improvements, primarily in Australia and certain North American locations.
Geographic Performance
Americold operates warehouses globally, with facilities in North America, Europe, Asia-Pacific, and South America. As of September 30, 2024, the company operated 239 warehouses globally, with 195 in North America, 25 in Europe, 17 in Asia-Pacific, and 2 in South America. The majority of revenue is generated in North America. The company also has minority interests in two joint ventures in Brazil and Dubai.
Risks and Challenges
While Americold has demonstrated resilience and strong execution, the company faces several risks and challenges that investors should be aware of. The temperature-controlled logistics industry is highly competitive, and the company must continually invest in maintaining its technological edge and operational excellence to stay ahead of its peers.
Additionally, Americold's global footprint exposes it to currency fluctuations and geopolitical risks, which could impact its financial performance. The company also faces the ongoing challenge of managing labor costs and workforce retention, as the industry grapples with workforce shortages.
Guidance and Outlook
Americold has provided guidance for the full-year 2025, which reflects the company's confidence in its growth prospects. For the year, the company expects adjusted funds from operations (AFFO) per share to be in the range of $1.51 to $1.59, with a midpoint of $1.55 per share. This represents an approximately 5% increase from the company's 2024 AFFO per share performance of $1.47, which was a 16% increase compared to 2023.
The company's guidance is underpinned by its expectations for continued growth in same-store NOI, with a projected increase in the range of 4% to 6% for the full-year 2025. Americold also anticipates maintaining strong warehouse services margins in excess of 12%, driven by its ongoing productivity initiatives and the benefits of its Project Orion technology transformation.
Within the 2025 same-store pool, Americold expects:
- Economic occupancy to be flat, with a range of -100 bps to +100 bps compared to 2024.
- Throughput volumes to increase in the range of 1% to 2%.
- Constant currency rent and storage revenue growth of 1.5% to 2.5%.
- Constant currency services revenue growth of 2.5% to 3.5%.
The company expects the non-same-store pool to generate NOI in the range of $0 to $7 million in 2025, compared to -$19 million in 2024. Americold plans to strategically exit 5 facilities during 2025, mostly leased properties. Development starts are expected to be in the range of $200 million to $300 million for 2025.
It's worth noting that in 2024, Americold generated an incremental $125 million in same-store warehouse services NOI, exceeding their $100 million commitment made two years ago. The company's same-store warehouse services margin finished at 13% in 2024, up almost 7 percentage points from the prior year.
Industry Outlook
The temperature-controlled warehouse industry is expected to see significant growth in the coming years, with a forecasted compound annual growth rate (CAGR) of 7.5% from 2025-2029. This growth is driven by increasing demand for frozen and perishable food products, the expansion of e-commerce in the grocery sector, and the need for efficient cold chain logistics solutions.
Conclusion
Americold Realty Trust has established itself as a dominant player in the temperature-controlled logistics industry, leveraging its extensive network, innovative solutions, and commitment to customer service. The company's ambitious growth plans, backed by a robust development pipeline and strategic partnerships, position it well to capitalize on the growing demand for reliable and efficient cold storage solutions.
While the company faces some risks and challenges, Americold's strong financial position, operational excellence, and forward-looking strategy suggest that it is well-equipped to navigate the evolving market landscape and deliver sustainable value for its shareholders. The company's diversified business model, with the Warehouse segment as its core driver, has enabled it to deliver strong financial performance despite macroeconomic challenges. Americold's focus on operational excellence, customer service, and strategic initiatives like Project Orion have positioned it well to continue growing and generating value for shareholders in the years to come.