Business Overview and History: Americold Realty Trust, Inc. (COLD) is a global leader in temperature-controlled logistics real estate and value-added services, focused on the ownership, operation, acquisition, and development of temperature-controlled warehouses. With a history spanning over four decades, the company has established itself as a trusted partner for leading food producers, retailers, and distributors worldwide.
Americold was founded in 1954 and has since grown to become a global leader in temperature-controlled storage, logistics, and value-added services. The company operates as a real estate investment trust (REIT) and is headquartered in Atlanta, Georgia. Americold's portfolio has expanded significantly over the years, growing from its initial focus on North America to include facilities in Europe, Asia-Pacific, and South America. By the end of 2023, the company operated 239 warehouses globally, offering approximately 1.4 billion cubic feet of storage space.
Throughout its nearly 70-year history, Americold has faced various challenges, including a recent cybersecurity incident in 2023 that partially impacted operations for a limited period. The company successfully contained and remediated the incident with the help of external experts, and all locations resumed full operations by the end of the second quarter. As of December 31, 2023, Americold had completed many of the recommended remediation activities associated with the incident and continues to enhance its policies and procedures to manage cybersecurity risks. Despite these challenges and periods of economic uncertainty, such as the recent impact of high inflation on consumer spending and food production levels, Americold has maintained its position as an industry leader.
The company's growth strategy has been centered around strategic acquisitions and organic expansion. In 2020, Americold acquired a 22% equity stake in the Comfrio joint venture, which operates 35 temperature-controlled warehouses in Brazil. However, in 2023, Americold divested its remaining 15% interest in the joint venture for $36.9 million, recognizing a $0.3 million gain and streamlining its portfolio to focus on its core markets.
More recently, in 2023, Americold announced its transformative "Project Orion" initiative, a comprehensive technology and business process improvement program aimed at driving future growth and enhancing operational efficiency across its global platform. The first phase of the project was successfully deployed in early 2024, with the company reporting minimal disruption to its operations during the implementation. As of June 30, 2024, Americold had incurred $107.3 million of implementation costs related to Project Orion, of which $69.4 million has been deferred. The project is expected to be substantially complete within three years from the start date.
Financial Performance and Ratios: Americold's financial performance has been characterized by a mix of growth and challenges in recent years. For the fiscal year 2023, the company reported total revenue of $2.67 billion, with a net loss of $336.27 million. Operating cash flow for 2023 was $366.15 million, while free cash flow stood at $35.92 million.
As of the company's latest quarterly report in Q2 2024, total revenue was $660.96 million, up 1.7% year-over-year. However, net loss for the quarter was $64.11 million. Operating cash flow for Q2 2024 was $136.67 million, representing a significant 64.8% increase year-over-year, while free cash flow turned positive at $73.33 million compared to a negative figure in Q2 2023.
Key financial ratios for Americold as of the latest quarter include: - Gross Profit Margin: 20.6% - Operating Profit Margin: 7.3% - Net Profit Margin: -10.6% - Return on Assets: -3.6% - Return on Equity: -7.8% - Debt-to-Equity Ratio: 1.11 - Current Ratio: 0.39 - Quick Ratio: 0.39
Liquidity: The company's liquidity position remains strong, with $44.2 million in cash and cash equivalents and $554 million in total liquidity as of June 30, 2024. Americold's net debt to pro forma core EBITDA ratio stood at approximately 5.3x at the end of the second quarter. The company also has access to a $619.64 million Senior Unsecured Revolving Credit Facility as of June 30, 2024, providing additional financial flexibility.
Operational Highlights and Initiatives: A key driver of Americold's success has been its focus on delivering exceptional customer service and expanding its value-added service offerings. In the second quarter of 2024, the company reported a second consecutive quarter of double-digit margins in its warehouse services business, reaching 13.2% compared to just 1.7% in the prior-year period. This improvement was largely attributed to the company's investments in workforce development, process improvements, and the implementation of its Project Orion technology initiative.
Americold has also made significant progress in growing its fixed commitment storage contracts, which now account for 56.6% of its rent and storage revenue, up 240 basis points from the previous quarter. This strategy helps to provide stability and predictability to the company's operations, mitigating the impact of seasonal fluctuations in demand.
In terms of growth initiatives, Americold remains focused on strategic partnerships and targeted expansion projects. During the second quarter, the company broke ground on a $30 million expansion project in Sydney, Australia, as well as an $85 million expansion in Allentown, Pennsylvania. Additionally, the company continued to make progress on its inaugural development projects with strategic partners Canadian Pacific Kansas City (CPKC) and DP World, further strengthening its position in key markets.
During the first half of 2024, Americold purchased 11 facilities that were previously accounted for as failed sale-leaseback financing obligations, resulting in a $115.1 million loss on debt extinguishment. The company also sold a facility for $9 million, resulting in a $3.6 million gain.
Business Segments and Geographic Distribution: Americold operates through three primary business segments:
1. Warehouse Segment: This is the company's primary source of revenue, accounting for over 90% of total revenues. It includes rent, storage, and warehouse services fees. During the first half of 2024, this segment contributed $401.66 million in NOI on $1.20 billion in revenues.
2. Transportation Segment: This segment generates revenue from fees charged for transportation of Americold's customers' products. In the first half of 2024, it contributed $20.37 million in NOI on $107.49 million in revenues.
3. Third-Party Managed Segment: This segment generates revenue from reimbursements received for expenses incurred for warehouses that Americold manages on behalf of third-party owners. In the first half of 2024, it contributed $4.29 million in NOI on $20.35 million in revenues.
Geographically, as of June 30, 2024, Americold operates 239 warehouses globally, with 195 in North America, 25 in Europe, 17 in Asia-Pacific, and 2 in South America.
Risks and Challenges: While Americold has demonstrated resilience in the face of macroeconomic headwinds, the company is not without its risks and challenges. The company's operations are heavily dependent on the health of the consumer and the food manufacturing industry, which have been impacted by persistent inflationary pressures and supply chain disruptions.
Furthermore, Americold operates in a capital-intensive industry, requiring significant investments in acquisitions, expansions, and technology upgrades. The company's ability to effectively manage these capital expenditures and generate adequate returns will be crucial to its long-term success.
Additionally, the company faces competition from other temperature-controlled logistics providers, both globally and in its local markets. Maintaining its competitive edge through innovation, operational excellence, and customer service will be essential for Americold to continue its growth trajectory.
Outlook and Conclusion: Despite the challenges faced by the broader economy, Americold has demonstrated its ability to adapt and thrive in the temperature-controlled logistics space. The company's strong focus on customer service, workforce development, and strategic growth initiatives have positioned it well for the future.
In its latest guidance, Americold has increased its full-year 2024 AFFO per share outlook to a range of $1.44 to $1.50, with a midpoint of $1.47, representing an approximately 16% increase from 2023. The company has also raised its same-store NOI growth guide for 2024 to a range of 11% to 14%, up from the previous guidance.
For the Global Warehouse segment, Americold expects full-year 2024 same-store constant currency revenue growth of 2% to 4%, constant currency rent and storage revenue per economic occupied pallet growth of 4% to 5%, and constant currency services revenue per throughput pallet growth of 7% to 8%. The company anticipates same-store constant currency NOI growth of 11% to 14%, driven by higher services margins.
For the Managed and Transportation segments, Americold expects NOI in the range of $42 million to $47 million. The company is also tracking to be at the high end or potentially exceed the current guidance range of $200 million to $300 million for announced development starts in 2024.
As Americold navigates the evolving landscape of the temperature-controlled logistics industry, its proven track record, robust financial position, and innovative mindset make it a compelling investment opportunity for those seeking exposure to this critical and growing sector. The global warehousing and storage industry, valued at $505.1 billion in 2023, is expected to grow to $700.2 billion by 2032, at a CAGR of 3.5% between 2024 and 2032, according to a report by IMARC. Americold's strategic initiatives and operational improvements position it well to capitalize on this industry growth and continue delivering value to its shareholders.