Q3 2021 Americold Realty Trust Earnings Call
Ford.
On behalf of the entire Miracle G. We think Fred please years of leadership in service to the company, we wish him the best.
Fred's departure is not related to any of the Sabrina with the board or members of management concerning corporate strategy or financial or accounting matters.
They've retained a nationally recognized search firm to assist us in the search for a permanent Chief Executive Officer.
We're focused on working efficiently, while taking the time, we need to find the best way to have to take a miracle it into the future.
We're confident that those leadership change comes with the right time for a miracle and the George is the right person to lead a miracle through this tramp period of transition.
None of these changes impacts who we are what we do.
The scale and scope of miracles network.
Like that's a critical partner in a customer supply chain and present compelling opportunities for continued revenue growth and enhance profitability America.
A miracle has a best in class infrastructure.
Differentiate a business model and talented and committed employees.
I remained excited about the company's long term prospects.
The long term process of this great confidence.
And with that I'd like to turn it over to Mark Smirnoff.
Great. Thank you Mark and good afternoon, everyone.
Consumer demand for temperature control food remains strong.
Even by net population growth combined with the end consumers, increasing preference for fresh and frozen food.
However, we continue to experience the ongoing effects from COVID-19 related supply chain and labor disruptions.
To discuss how these disruptions are impacting our business and the actions. We are taking let me introduce frog chambers are cheap commercial officer.
Thank you Mark.
Beginning with the revenue side or physical occupancy improved sequentially versus the second quarter in line with our expectations and consistent with normal seasonality, but remains below third quarter of 2020 levels and well below pre COVID-19 levels for a typical third quarter.
Our current physical occupancy levels and R. U S portfolio are consistent with holdings and the overall U S cold storage industry.
Which can be seen in the USDA industry data, we referenced in the past.
Ongoing conversations with our food manufacturers indicate.
Indicate that production volumes are expected to increase over time.
Many of our customers are seeking to improve their inventory positions to better support their retail and food service customers.
Last quarter as we shared we conducted a formal survey of our top 50 customers.
Significantly higher reaching over 20%.
Additionally, we have used more temporary workers in overtime and substantially higher than normal course in order to serve our customers.
The cost of power has also recently spiked in many geography's within our global network, particularly in certain parts of Europe and the U S.
And we anticipate continued increases in the near term.
As a reminder, labor in power costs, together represent 70% to 75% of our total cost structure.
Are active portfolio management process is designed to ensure appropriate levels of profitability for each customer across our portfolio.
As such we expect to recover most of the inflationary costs by increasing the rates, we charge in our warehouse business.
As of this call. We have initiated conversations are have taken action with the vast majority of our customers and we've made significant progress agreeing to or implementing new rates reflective of today's cost environment.
We're confident that by the end of the first quarter of 2022, we will have materially Rerated our warehouse business.
In summary, we are dynamically adjusting our business to mitigate the impact of elevated inflationary pressures experienced across our portfolio.
Those are food manufacturing and retail customers are seeing it in their businesses and they too are increasing prices to help offset it.
In addition to increasing rates are a miracle to operating system is driving efficiency and productivity to mitigate some of these cost increases however.
However at the end of the day, we cannot all set all of it.
And consumers are and will continue to pay higher prices for food, including fresh and frozen items.
Now back to Mark to discuss our third quarter results and update the balance of the year.
Thank you Rob.
For the third quarter, we reported total company revenue of 709 million in total company NOI of 156 million, which reflect a 42% increase and a 15% increase year over year respectively.
Corporate SG&A totaled $46 million for the third quarter of 2021 as compared to $36 million for the prior year.
With the challenging labor market and elevated inflation continue to weigh on our same store results.
For the third quarter same store global rent and storage revenue increased by one 5% year over year and increased by one 4% on a constant currency basis.
This was driven primarily by rate escalations, partially offset by a decline in economic occupancy.
Our same store economic occupancy was 76, 5%, which reflects a decrease of 179 basis points from last year's third quarter economic occupancy.
As we were impacted by reduced food production levels, yet stable consumer demand.
The occupancy decline was partially offset by a three 7% increase to our constant currency average storage rate for economic pallet, driven by rate Escalations and business mix.
As previously noted on a sequential basis economic occupancy improved approximately 132 basis points from the second quarter consistent with our expectations.
Our same store global rent and storage NOI increased by three 4% year over year and three 2% on a constant currency basis.
This was due to rate escalations, partially offset by lower economic occupancy and increased power and property insurance costs year over year.
Same store global rent and storage NOI margin increased 115 basis points to 63, 5% due to the same factors.
Same store global warehouse services revenue for the third quarter increased by two 9% year over year and two 4% on a constant currency basis.
This revenue growth was driven by rate increases and business mix, which increased our constant currency warehouse services revenue per throughput pallet by four 3%.
This was partially offset by a one 9% decline in throughput.
Our same store global warehouse services NOI decreased by 35, 5% year over year and 36, 5% on a constant currency basis. This was primarily driven by higher cost of labor and warehouse supplies due to the elevated inflation.
Being our yield to 7% to 9% coming out of the stabilization date due to the increase in our cost basis in the current market environment.
Additionally, with respect to our recent Savannah build given the same broad market dynamics affecting our entire portfolio. We are now expecting this facility to generate a revised yield next year of 7% to 9%.
With regard to our seven global development projects in process of which are dedicated build the suits our expectations remain in line with our underwriting in previously communicated disclosures.
Turning to acquisitions.
On September 1st we closed on the previously announced acquisition of Newark facility management.
Regarding the previously announced acquisition of Lago Cold stores in Brisbane, Australia, We have received regulatory approval and expect to close later this year.
Finally, subsequent to quarter and we.
We entered into a purchase agreement to acquire newly completed cold storage facility in Denver, which we expect to close in November for a total investment of approximately $59 million. This facility replaces the lease facility that expires at the end of the year.
All of these investments were or will be match funded using a combination of cash equity forwards.
That we have previously raised in our multi currency revolver.
Now turning to our balance sheet and capital markets activity.
During the quarter, we exercise five 7 million a previously raised forward chairs for approximately $206 million in net proceeds to help fund our developments in acquisitions.
At quarter end total debt outstanding was 3 billion.
We have total liquidity of approximately 810 million consisting of cash on hand revolver availability and $55 million outstanding equity forwards.
Our net debt to pro forma core EBITDA was approximately $5 five times.
Turning to our full year 2021 guidance, where are affirming full year 2021, <unk> guidance of $1.15 to $1.20 per share.