Lineage says cold storage market working through oversupply

Lineage executives said Wednesday that the temperature-controlled warehouse market is stabilizing after experiencing an oversupply prompted by the pandemic. The Novi, Michigan-based company said its customers’ food inventories have returned to more normal, albeit leaner, levels.

Lineage (NASDAQ: LINE) reported a net loss of $51 million for the first quarter on Wednesday before the market opened. Adjusted funds from operations (AFFO), which exclude depreciation, acquisition and restructuring costs (among other items), of 78 cents per share, came in 8 cents lower year over year.

Consolidated net revenue of $1.3 billion was up less than 1% y/y and just shy of the consensus estimate of $1.32 billion. A 17% y/y decline in container volumes negatively impacted drayage revenue during the quarter.

“In the first quarter, we delivered results ahead of our expectations while navigating a highly dynamic operating environment,” said Lineage President and CEO Greg Lehmkuhl. “We again saw core business trends align closely with typical seasonal patterns, further reinforcing our view that the industry is stabilizing.”

On a same-warehouse comparison, physical occupancy was 76.4% in the quarter, 30 basis points lower y/y and 290 bps lower sequentially. Occupancy normally declines 300 bps from the fourth quarter to the first quarter.

Pallet throughput declined 3% y/y, but storage revenue per pallet was up 2%. The metrics were up 2% and flat, respectively, from the fourth quarter. The company said it’s on track to achieve net price increases of 1% to 2% this year, noting that 70% of its revenue book has already been repriced.

Management said new cold storage space grew 15% from 2021 through 2025, while demand increased only 5%, leaving the market roughly 10% oversupplied. However, new capacity coming online is expected to represent less than 2% of the market this year and next. It said it is experiencing pricing pressure in only 15% of U.S. markets, which are still considered overbuilt.

Adjusted EBITDA of $314 million was 3% higher y/y, with the adjusted EBITDA margin increasing 70 bps y/y to 24.2%. The company has 22 facilities currently under construction, which will add $150 million in annual EBITDA. (Lineage reported $1.3 billion in adjusted EBITDA in 2025.)

Lineage reiterated full-year EBITDA guidance of $1.25 billion to $1.30 billion, and AFFO per share of $2.75 to $3.00.

Lineage manages more than 500 facilities with 3.1 billion cubic feet of space across North America, Europe and the Asia-Pacific region. It also provides freight forwarding, customs brokerage, drayage and truck transportation.