Lineage earnings grow on post-pandemic inventory rebalancing

Lineage's earnings continue to grow on post-pandemic inventory rebalancing, with customers expecting to boost sales in 2025.

Lineage's key performance indicators

Lineage cold warehouse - Source: Lineage

Cold storage operator Lineage Inc. said in its quarterly press conference on Wednesday that its customers remain growth-oriented, but food inventories have stabilized at lower levels.

The total volume of goods handled at Lineage's facilities has not changed significantly since the pandemic, but customers are now holding less inventory than they did pre-COVID. Food manufacturers have ramped up production in 2022 to replenish warehouses, but they have overproduced and held more than they needed. The cold storage industry has adjusted inventory for 2023 and the first half of 2024. Normal seasonal trends have since returned, said Lineage CEO and President Greg Lehmkuhl.

Lineage (NASDAQ: LINE) reported a net loss of $80 million for the fourth quarter of 2024 on Wednesday, before the market opened. Adjusted cash flow from operations (AFFO) — excluding depreciation, acquisitions and restructuring costs — came in at $0.83 per share, up 73% year over year and beating the average estimate by 19 cents. The adjusted result included a tax benefit of 5 cents per share.

Lineage's key performance indicators 2024

Lineage's key performance indicators (Source: Lineage / Freightwaves)

The Novi, Michigan-based real estate investment trust reported consolidated revenue of $1.34 billion in the fourth quarter, up 0.4% year over year, including benefits from recent acquisitions.

On a same-store basis, the number of pallets handled at Lineage facilities decreased 0.7% year over year, with inventory revenue per pallet down 0.9%. Actual occupancy for the quarter was 80.3%, down 160 basis points from the same period last year.

However, Lehmkuhl stressed that these changes largely reflect a return to normal seasonal trends.

The company forecasts full-year 2025 AFFO to range from $3.40 to $3.60 per share, representing a 6% increase year-over-year at the midpoint of the forecast range. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) is expected to range from $1.35 billion to $1.4 billion, up 3.5% year-over-year at the midpoint.

This forecast assumes normal seasonal patterns, no strong market recovery, and no impact from future acquisitions.

This growth rate is very close to the actual growth in full-year 2024 (AFFO/share up 6.5% and adjusted EBITDA up 4%).

“I think what’s been misunderstood is that we’re growing this company 4% total EBITDA, 6% AFFO per share in a major inventory rebalancing. In the stiffest headwind the industry’s seen in many years, we’re still growing, and we’re built to grow,” Lehmkuhl said.

He also noted that most of Lineage’s customers are planning to increase sales in 2025.

“I think the upside here, that’s not in our guidance, is that what we’re hearing from customers is they’re acutely focused on increasing sales. They’re doing promotional activity … discounting … in order to get volume moving,” he said.

The company currently has more than $1.5 billion in capital that it can use to fund acquisitions and new developments in 2025 without issuing additional shares. However, that’s not a major plan this year, as the company typically invests only about half of that capital each year.

Lineage raised $5.1 billion in its IPO in July, using $4.9 billion to reduce debt. LINE shares fell to $56.78 after nearing $90 shortly after the IPO. As of 10:54 a.m. EST Wednesday, LINE shares were up 1.7%, while the S&P 500 index was up 0.8%.

Lineage manages 488 facilities with a total of 3.1 billion cubic feet of cold storage space in North America, Europe and the Asia-Pacific region. The company also provides freight forwarding, customs brokerage, inland transportation and trucking services.

See more: