Americold Realty Trust(COLD) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The third-quarter AFFO per share was reported at $0.35, aligning with expectations despite ongoing industry challenges from lower consumer demand and increased supply [17][22] - Same-store economic occupancy decreased to 75.5%, reflecting continued demand pressure, while same-store throughput saw a slight sequential increase due to the annual agricultural harvest [22][23] - Same-store NOI contracted from the prior quarter primarily due to seasonal increases in power costs, although rent and storage revenue per economic pallet increased both sequentially and year-over-year [22][23] Business Line Data and Key Metrics Changes - Approximately 30% of capacity and revenue comes from production-attached facilities, which are viewed as valuable assets for future expansion [10] - Four distribution centers account for about 50% of capacity and 40% of revenue, facing pricing competition due to excess capacity [12] - Retail distribution centers represent about 10% of capacity and 20% of revenues, with growth expected as the company expands capabilities overseas [14] Market Data and Key Metrics Changes - The Asia-Pacific region's total warehouse NOI increased by approximately 16% year-to-date, with economic occupancy well over 90% [18] - The macro environment remains challenging, with customer commentary indicating constrained demand, particularly among lower-income consumers [19] - The company anticipates that excess capacity will take a couple of years to be fully absorbed, with pricing gains expected to moderate in the fourth quarter [26][54] Company Strategy and Development Direction - The company aims to grow market share in the fast-turning retail sector and expand its quick service restaurant business into new geographies [6] - A focus on maintaining fixed-commitment contracts is emphasized, as they provide stable cash flows and long-term customer relationships [8][23] - The company is actively managing its real estate portfolio, exiting low-occupancy facilities while evaluating triple-net lease arrangements to drive occupancy levels [20][24] Management's Comments on Operating Environment and Future Outlook - Management believes that current headwinds are largely transitory, with expectations for pricing and occupancy pressures in 2026 [19][25] - The company is confident in the long-term trajectory of the cold storage industry, citing unique value propositions and mission-critical infrastructure [21][27] - Management is focused on identifying new sales opportunities and expanding into potential new sectors, including both food and non-food categories [20][54] Other Important Information - The company has a development pipeline of approximately $1 billion in attractive opportunities, balancing capital allocation with maintaining dividends and an investment-grade profile [24][62] - The company is trading at a significant discount to intrinsic value, with a historically high cap rate of around 10% [29][30] Q&A Session Summary Question: How should we think about throughput over the next 12 months? - Management indicated that throughput is expected to remain challenged due to lower demand, particularly from lower and middle-income consumers, with muted seasonal demand anticipated [32][33] Question: What are you doing to control costs in the business? - Management highlighted effective cost control measures, including matching direct labor to throughput, which has helped maintain handling margins above 12% [35][37] Question: Should we expect more fixed commitment contracts to be up for renewal in the beginning of the year? - Management clarified that contract renewals are spread throughout the year based on when they are signed, rather than being concentrated in specific quarters [41] Question: What happens to low-occupancy facilities from a P&L perspective? - Management explained that costs associated with low-occupancy facilities are generally minimal and may be capitalized once removed from active status, with customers often moved to owned infrastructure [44] Question: How do you see the new competition in the industry? - Management noted that many new market entrants are struggling with unsustainable business models, which could lead to accelerated exits from the market [50][52]