Lineage, a prominent player in the temperature-controlled warehousing sector, has announced that the market is gradually stabilizing, even as it works through an oversupply challenge that emerged during the pandemic. Despite reporting a net loss of $51 million in the first quarter, the company's leadership remains optimistic, noting that customer inventory levels are returning to a more balanced state. This adjustment suggests a path toward healthier market dynamics for the cold storage industry.
On Wednesday, Lineage revealed its first-quarter financial outcomes, which included a net loss of $51 million. The adjusted funds from operations (AFFO) stood at 78 cents per share, representing an 8-cent decrease compared to the previous year. Consolidated net revenue reached $1.3 billion, a marginal increase of less than 1% year-over-year, slightly below the anticipated $1.32 billion. A notable factor impacting drayage revenue was a 17% year-over-year reduction in container volumes.
Greg Lehmkuhl, President and CEO of Lineage, commented on the quarter's performance, stating that the company's results surpassed internal expectations despite a highly fluid operational environment. He highlighted that core business trends are now closely mirroring standard seasonal patterns, reinforcing the view that the industry is finding its equilibrium. This normalization of trends is a positive indicator for future stability.
An analysis of same-warehouse performance showed a physical occupancy rate of 76.4% for the quarter, a slight decrease of 30 basis points year-over-year and 290 basis points sequentially. This seasonal decline is typical, with occupancy usually dropping by 300 basis points between the fourth and first quarters. Pallet throughput saw a 3% year-over-year decline, yet storage revenue per pallet increased by 2%. Lineage projects achieving net price increases of 1% to 2% this year, with 70% of its revenue already subject to repricing.
Management also addressed the broader market landscape, noting that new cold storage capacity expanded by 15% from 2021 through 2025, while demand only grew by 5%, leading to an approximate 10% market oversupply. However, new capacity additions are expected to represent less than 2% of the market in the current and upcoming years, which should alleviate some of the pressure. The company indicated that pricing pressure is currently concentrated in only 15% of U.S. markets, primarily those considered overbuilt.
Adjusted EBITDA rose by 3% year-over-year to $314 million, with the adjusted EBITDA margin improving by 70 basis points to 24.2%. Lineage currently has 22 facilities under construction, anticipated to contribute an additional $150 million in annual EBITDA. The company reiterated its full-year EBITDA guidance, projecting it to be between $1.25 billion and $1.30 billion, with AFFO per share estimated at $2.75 to $3.00. Lineage oversees over 500 facilities, encompassing 3.1 billion cubic feet of space across North America, Europe, and the Asia-Pacific region, also offering freight forwarding, customs brokerage, drayage, and truck transportation services.
The cold storage market, after facing the challenges of pandemic-induced oversupply, is demonstrating clear signs of recovery and normalization. Lineage's strategic focus on repricing and managing new capacity is positioning it to navigate this evolving landscape effectively, with expectations of continued stabilization and modest growth in the coming periods.