New American CEO faces tough questions about recent performance
Labor headwinds and COVID-related work outages are putting pressure on food production around the world, a trend that is spilling over into the New Year. This decline is impacting the performance of Americanold Realty Trust, a refrigeration facility operator.
Amelie Cold (NYSE: COLD) Reported that adjusted funding (AFFO) from the fourth quarter of 2021 was 31 cents per share, down 16% year-on-year. The core FFO exceeded analysts’ expectations by a penny. The company posted a net loss of 3 cents per share during this period.
Global warehouse revenues were $ 554 million, up 36% year-over-year. Acquisitions, expansion projects, and higher market rates helped increase. Americold operated 12 more facilities during this period, up 5% from the year-ago quarter. Throughput pallets were 25% higher and rent and storage revenue per pallet increased by 8%.
By removing acquisitions and changes in foreign exchange rates, the metrics have become more modest. Warehouse revenue was up only 3%, with throughput pallets slightly above 1% and rent and storage revenue per pallet increased by only 5%.
“Like many other labor-intensive industries, labor availability remains a challenge for food production customers and negatively impacts production levels,” said new CEO George Chappelle on Thursday night. Said on the phone with the list. “This, in turn, negatively impacts our economic and physical occupancy and throughput.”
In another press release issued after Thursday’s closing, what surprised analysts was that Americanold nominated Chappelle as permanent CEO. He tentatively took on that role in November. Former President and Chief Executive Officer Fred Behrer was suddenly dismissed..
Cost increases continue to outpace the rate at which rate increases can be carried out. The segment’s net operating income was $ 151 million, up 4% year-over-year. On a store basis, NOI’s contribution decreased by 8%, excluding exchange rate fluctuations.
70% of Americold’s warehouse revenue comes from the top 100 customers. Half of these contracts allow rate adjustments as long as Americanold can show a “significant cost increase.” The other half of the contract requires good faith negotiations. It usually costs a lot of money for 60 days before the rate hike begins.
30% of warehouse revenue comes from small customers who can raise rates at any time, as long as notifications are provided 30-45 days in advance.
Many of the recent price increases have been reflected in the fourth quarter results. The rest will be shown in the first quarter results.
Service revenue per throughput pallet for comps in the same store increased by just 3.8% year-over-year in the quarter. However, as the rate hike took hold, the December index rose 5.9% year-on-year.
Management said “no significant changes” to the top 25 customers, who account for 49% of global warehouse revenue (proforma basis). Customer attrition was 3.3% of warehouse revenue. Management said most of the slowdown in trends during the quarter was associated with lower food production, resulting in lower space usage.
Economic share fell 140 basis points to 77.8% in the quarter.
“We are confident that inventories will return to historic standards once the workforce normalizes,” Chapel added. He estimates that the outbreak of Omicron, which increased absenteeism, delayed labor recovery by three to six months.
The company led an AFFO of $ 1 to $ 1.10 per share in 2022. This is down from $ 1.15 in 2021 and $ 1.29 in 2020. Revenue from warehouses in the same store is expected to level off to 2% (constant currency) year-on-year. ), And the occupancy is expected to drop from 100bps to 200bps annually.
Management guidance suggests an approximately $ 40 million step up in selling, general and administrative, and administrative expenses, more than half of which are future performance-based compensation and $ 11 million equity holding grants. Is related to.
Analysts questioned the rise in wages, given that stock prices have fallen 33% since July (S & P 500 has fallen only 1% during that period). Management said growth was needed to maintain talent across the network. The rest of the $ 40 million is related to system integration and general cost inflation.
Appointment of Chapel as Permanent CEO Surprise Analysts
Phone analysts were surprised to hear that Chapel had permanently joined the role of CEO after previously saying that Chapel was not a candidate. The reaction seemed to focus not on his credentials, but on his quick look to return to the workforce after a short retirement.
Chappelle has 35 years of experience in the food and beverage and consumer goods industry and has previously played a leading role in Tyson Foods, The Kraft Heinz Co., and Sara Lee Foods. He also AGRO Merchants GroupWhich Acquired by Americold for $ 1.74 billion In the second half of 2020. At that time, Agro was the fourth largest refrigeration provider in the world.
He was one of three new board members nominated when Baler was dismissed.
Chapel said he is focusing on improving labor management and aims to increase the proportion of full-time workers across the US facility network. He said this would improve productivity and reduce costs.
Customer service is also a top priority. He pushes to ensure that the service returns to “best in class, not just pre-COVID levels”. He also cites macroeconomic conditions and supply chain issues as a continuing threat and hopes that the company’s development projects are on track.
Americold plans a $ 100- $ 200 million development project in 2022.
One analyst asked Chapel if Agro made a mistake in selling to Americold, and that was why he retired, imposing problems with Americold’s services and financial performance.
“I don’t think Americanold is working well for complete clarity,” Chappelle replied. “The macroeconomic environment caused by COVID and unavailable labor has never been experienced in my career. I have experienced expensive labor. I have never experienced such unavailable labor. I think that really affected service levels. That’s what really confuses companies …. Americanold isn’t affected by these macroeconomic issues. “
The company closed in 2021 with liquidity of $ 803 million and debt of $ 3.1 billion, mostly related to real estate. Including EBITDA expectations from recent acquisitions, EBITDA from net debt to proforma core increased from 4.4x to 6.1x at the end of 2020.
Americold owns and operates 250 refrigeration facilities (9 in a third-party managed segment) with 1.5 billion cubic feet of space in North America, Europe, Asia Pacific and South America.
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