Increased food prices negatively impacting storage facility occupancy as per Lineage
Lineage Inc., a leading operator of temperature-controlled warehouses, has announced a revision to its full-year 2025 outlook and adjusted its AFFO guidance for 2022.
For the second quarter of 2022, Lineage reported a consolidated net revenue of $1.35 billion, marking a 1% year-over-year increase. However, no new information was provided about the headline net loss, Adjusted Funds from Operations (AFFO), consolidated net revenue, pallets processed, storage revenue per pallet, physical occupancy, full-year 2022 AFFO guidance, adjusted EBITDA guidance, or expectations for sequential improvement in net operating income.
Lineage lowered its full-year 2022 AFFO guidance by 20 cents per share to a new range of $3.20 to $3.40 per share. The company also revised its Adjusted EBITDA guidance, with the new range set at $1.29 billion to $1.34 billion, down from the prior guidance of $1.35 billion to $1.40 billion. This revision is attributed to delayed occupancy recovery and stable pricing, as well as muted seasonal inventory levels and a later-than-expected demand increase.
The company's new forecast calls for inventories to build throughout the rest of 2022, pushing occupancy higher across the network, albeit at a lower rate than previously contemplated. No new information was provided about inventories building throughout the rest of 2022 or their potential impact on occupancy.
Despite the competitive industry, management reports that the pricing environment remains stable. Lineage's focus is on revenue growth, optimizing labor productivity, and controlling the controllables. The company expects continued sequential improvement in both same warehouse and total net operating income in the second half of 2022.
Pallets processed through Lineage's facilities declined 3% year over year in the second quarter. However, there was a 5% sequential increase in revenue per pallet during the same period. Physical occupancy was 74.6% in the second quarter, a 230 basis points decrease year over year and 190 bps worse than the first quarter.
Lineage manages 485 facilities with a total of 3.1 billion cubic feet of space across North America, Europe, and the Asia-Pacific region. In addition to temperature-controlled warehousing, Lineage provides services including freight forwarding, customs brokerage, drayage, and truck transportation.
Lineage reported a headline net loss of $7 million for the second quarter. The company's adjusted funds from operations (AFFO) for the second quarter was 81 cents per share, a 6 cents increase year over year. Storage revenue per pallet showed a slight increase in the second quarter.
Management did not provide any new information about a potential new CEO for Lineage or XPO in this announcement. The goal is to set the stage for strong operating leverage when the industry rebounds.
- Given the lower AFFO guidance by Lineage and the revised Adjusted EBITDA guidance in the finance sector, the business industry may witness a slower recovery in the second half of 2022.
- Despite the challenges in the industry, Lineage, with its diversified services including temperature-controlled warehousing, freight forwarding, and truck transportation, continues to focus on optimizing labor productivity and revenue growth to maintain stable finance outcomes.
