Americold Realty Trust, Inc. (NYSE: COLD) Second Quarter 2022 Earnings Conference Call August 4, 2022 5:00 p. m. Eastern Time
Participating companies
Scott Henderson – Vice President of Capital Markets and Investor Relations
George Chappelle – President and Chief Executive Officer
Rob Chambers – Commercial Director
Marc Smernoff – Chief Financial Officer
Conference Call Participants
Dave Rodgers – Robert W. Baird
Mike Müller – JPMorgan
Michael Carroll – RBC
Samir Khanal – Evercore
Joshua Dennerlein – Bank of America
Ki Bin Kim – Trust
Craig Mailman – Citigroup
Bill Crow-Raymond James
Vince Tibone – Green Street Advisors
Anthony Powell – Barclays
Operator
Thank you for staying there. He is the operator of the convention. Welcome to Americold Realty Trust’s quarter 2020 earnings call. As a reminder, all participants are in listen-only mode and this convention is recorded. After the presentation, it will be imaginable to ask questions. [ Operator Instructions]
I would now like to speak with Scott Henderson, Vice President of Capital Markets and Investor Relations. Please pass
Scott Henderson
Good afternoon. Thank you for joining us today for the Americold Realty Trust Quarter 2022 Earnings Convention call. In addition to the press release issued this afternoon, we have presented an additional presentation containing other main points about our results, which is in Investor Relations. segment of our online page in www. americold. com.
This afternoon’s convening of the convention is moderated by Americold’s president and CEO; George Chappelle; sales manager; Rob Cameras; and Chief Financial Officer Marc Smernoff. Management will make some comments, after which we will open the call for questions.
At the time of today’s call, comments ready through control would possibly involve forward-looking statements. Forward-looking statements address issues involving hazards and uncertainties that may also cause actual effects to differ from those discussed today. A series of points can also cause the actual effects to differ materially from those anticipated.
Forward-looking statements are based on existing expectations, assumptions and ideals and the data we hold at the time and relate only to the date they are made, and Control assumes no legal responsibility to publicly update any of them as a result of new data or long-term events.
During this call, we will talk about certain non-GAAP monetary measures, adding core EBITDA and AFFO. Full definitions of those non-GAAP monetary measures and reconciliations with comparable GAAP monetary measures are contained in the supplemental data package found on the Company’s website. website.
Now I will pass the call to George.
George Chappelle
Thank you, Scott, and welcome to our call from the 2022 quarter earnings convention. This afternoon, I will take stock of the 4 short-term priorities we are focusing on, summarize our effects, and comment on recent external expansion activity. Then I’ll talk about our outlook for the rest of the year. Rob will provide an update on recent consumer initiatives, and Marc will review our monetary effects in more detail.
Let me start with the four short-term priorities we are focusing on. First, we continue to make great strides in expanding our warehouse in line with measures to offset inflationary pressures in our charge structure. At the end of the current quarter, we committed to the ceiling of all known inflation remained constant until the end of the first quarter, which we achieved. The progress of those pricing projects can be found on page 8 of our IR supplement. exchange rates increased by up to 6. 6%. Revenue from services consistent with debit platform increased by 7. 9%.
As a reminder, some of those increases were implemented in the current quarter, meaning the full execution rate won’t be visible until third quarter results. For the current quarter, most of the inflationary pressures we saw were for electric power prices and warehouse source prices. We have implemented more specific pricing projects and electric power surcharges to address this known inflation, and we will end the third quarter at an existing speed that covers all known inflation experienced in the current quarter.
In the third quarter, we expect most inflationary pressures to continue in electric power and warehouse supplies. If this is the case, we will continue to review our rates as a component of electric power surcharge initiatives. Second, we continue to focus on control in order to optimize our mix of permanent and transient affiliates in our facilities, while significantly reducing our turnover rate. Temporary components charge more consistently per hour of paint and are less productive than americold permanent components. Higher turnover is also costly and leads to inefficiencies in our business.
As a reminder, before mid-2021, overall, we had approximately 70% permanent hours and 30% transient hours in our warehouse portfolio. During the current part of 2021, this ratio is 60-40. In the current quarter, we achieved a significant improvement and returned to 70-30. However, our turnover rate is still particularly higher than last year’s and pre-COVID levels. We ended June this year with an annualized earnings trend of about 22 percentage points above june 2021.
Compared to 2019, a year before COVID and more in line with previous levels, we were about 30% higher than in 2019. While higher rotation rates can be expected in this environment as we work to develop our permanent relationship to temperature, in fact, we are very focused on reducing this metric. Keep in mind that a new associate is not fully productive for about 3 months. We expect to see continued improvement throughout the year thanks to our team’s efforts, but still in fact, it will take time in this challenging painting environment to continue to drive our ratio from permanent to temperature and reduce turnover.
Third, we focus on differentiating our platform through offering a top-notch visitor service. While we had transient hard work in 2021, we were less productive and less efficient, and we know this had a negative effect on visitor service. In addition, around 21 and until 2022, we had a particularly high turnover, which also had a negative effect on visitor service for the same reasons. Keep in mind that, as I said on the last call, I don’t think those are Americold-specific topics. I believe that this labour market has had an impact on all companies in the service sector that have a professional workforce.
The merit of a productive, solid and basically permanent workforce, fully trained in the Americold operating system, allows us to serve our consumers to the highest degrees and, in the end, leads to an accumulation of market share. Our final domain of concentration is to make sure our progression assignments are delivered on time and on budget, and then generate the right returns. Our Dunkirk allocation was put into operation in the current quarter, on time and on budget, and is on track to stabilize as it flows into our later IR. We continue to make progress in this domain and look to the future to exhaust our assignments.
Let’s move on to the existing operating environment and our quarterly results for the time being. A significant number of our customers in the food industry are starting to see some improvements in the hard work market, which has allowed them to start expanding their production levels. In addition, while the final demand for temperature-controlled food from customers remains strong, the challenging inflationary market has begun to change customer behavior. Some customers buy less at the grocery store because inflation stretches them.
These two factors, the accumulation in the production of our food brands combined with a slight reduction in customer purchases, have led to a significant accumulation in our physical and economic occupation. For the quarter, in our group of equal stores, we saw cumulative occupancy across 288 basic issues compared to the current quarter of 2021. This is the first time that economic employment has increased year on year since the current quarter of 2020. As we have discussed, the improvement in economic employment is very enriching for the bottom line. We are encouraged and that this improvement is sustainable throughout the year.
This improvement in occupancy, which aligns with the bloodless knowledge of the garage industry provided through the USDA, demonstrates the critical facet of our infrastructure and facilities within the temperature-controlled food source chain. Food manufacturers’ products pass through our production merit facilities, distribution centers and retail. Distribution centers, and then eventually they arrive at a grocery store or restaurant where they can be purchased through end consumers.
On the charge side, although most of the inflation is in our electric power and storage charge, we continue to see labor inflation in some markets. In addition, although we are closer to the old permanent-temporal relationship in our staffing model, our turnover rate is particularly high. This rotation point has a negative effect on our productivity and efficiency. It is also expensive because we have to recruit, rent and exercise new permanent partners. reflected in the margin of our warehouse facilities.
For the quarter, our global warehouse group generated an expansion in overall and net profit consistent with a profit stream of 8. 1% and 3. 1%, respectively, either at consistent exchange rates. AFFO consistent with a consistent percentage of $0. 27. The main points that led to those effects were a significant increase in charges and occupancy rate, partially offset by continued inflation in our job design and labor inefficiencies in our service and storage activities and the strengthening of the U. S. dollar.
Let us now move on to our external expansion activity. We continue to make strategic investments and acquisitions that will help us better serve our customers globally. Many South American countries have giant agricultural and food economies and have superior demographic expansion. Today, we announce the recent creation of a Latin America-focused joint venture with Patria, an experienced Brazilian personal justice company affiliated with Blackstone.
As a reminder, lately we are 15% partners with Patria in SuperFrio, a JV aimed at Brazil. LatAm, the call of this new JV focuses on the production of high-growth food in Latin American countries outside Brazil, such as Mexico, Chile, Uruguay and Colombia. LatAm has its own professional control equipment separate and distinct from the SuperFrio platform. Under the terms of the agreement, the overall equity commitment for this platform is just under $300 million, of which Americold’s commitment is 15% or $45 million. Americold sits on the Board of Directors and maintains the exclusive option to obtain the 85% stake of our partner from 2026.
The investment era is expected to span the next 4 to 5 years. Americold recently contributed its Chilean assets to launch the JV, which pre-financed most of our commitment to equity. We are excited about this new expansion opportunity. In addition, in the quarter we completed the acquisition of a port facility in Poland that we had rented in the past. As we have discussed in the past, we prefer to be homeowners than tenants, as this gives us more control over our services in the long run.
Also after the end of the quarter, we acquired the DeBruin bloodless workshop in Tasmania, Australia. DeBruin is comprised of a facility totaling approximately 2 million cubic feet and is the largest bloodshed garage operator in Tasmania. It is strategically in Bernie Harbour and close to Devonport Harbour. DeBrun’s visitor base includes dairy, potato and seafood manufacturers, and a significant number of those consumers are bloodless American consumers.
In addition, this acquisition has allowed Americold to obtain new business from a major fast food visitor who is looking for a spouse with Victoria and Tasmania. Finally, after the end of the quarter, we also finalized the acquisition of a facility in New Zealand that we had leased in the past.
Let’s move on to orientation throughout the year. At this point, we maintain our AFFO consistent with a consistent percentage of direction for the full year 2022 in the range of $1 to $1. 10. Marc will provide feedback on the individual components. We are encouraged by the recent good fortune of our pricing projects and the improved occupancy rate and its positive effect on our core storage business.
While we expect this to continue throughout the year, the operational hurdles are: continued relief in production volumes due to the effect of inflation and customer buying habits.
Continued inflation in our business, basically electrical power and warehouse materials in some hard labor markets with continuous value offsets that will be moved from 30 to 60 days in maximum cases. The workforce and the superior power and turnover of our warehouse Sector due to a challenging job market and the uncertainty surrounding COVID continue to be a potential disruption.
Below the RNE level, we are also seeing the following macroeconomic hurdles: higher interest rates on our floating-rate debt due to higher base rates and a stronger US dollar, which has a negative effect on foreign market earnings due to currency conversion. .
Finally, regarding ESG, which is a key priority for us here at Americold, I am pleased to announce that we recently finalized our submission to GRESB’s Carbon Disclosure Project for 2022. We expect to get our GRESB score in the fourth quarter.
With that, I pass it on to Rob.
stealing cameras
At the moment, we are pleased to report an overall expansion of corporate and NOI earnings of 11% and 8%, respectively. This expansion of profits and NOI occurred in all 3 segments, driven primarily through our storage business. the profit basics of our warehouse business, whether in food brands and retailers.
First, we have noticed a sharp improvement in economic employment, and this is sustainable for the rest of the year. Second, we continue to be a success with our pricing projects. As we have discussed in previous calls, we will continue with our pricing. projects within our Global Warehouse business to deal with known charge increases due to inflation.
During this era of inflation, we want to do this to protect our margin dollars. We controlled exiting the current quarter with increases in value to cover the known inflation of the first quarter. Some of those increases were implemented at the quarter, meaning the full execution rate won’t be visible until third-quarter results.
As George mentioned, the progress of those pricing projects can be seen on page 8 of our IR supplement. 7,9%. Conversations with consumers remain productive around our pricing projects.
We are very specific and data-driven in our approach. As a result, we continue to demonstrate Americold’s ability to generate margins through value increases to offset inflationary pressures. As the occupancy rate begins to return, we try to offer the best Service.
Let’s move on to our marketing efforts. At the end of the quarter, within our Global Warehouse segment, lease and garage earnings from fixed obligation contracts increased in absolute dollars to $379 million, to $333 million at the end of the current quarter of 2021. On a combined pro forma basis, we obtained 40. 5% of the lease and garage profits from fixed commitment garage contracts.
While we have ever-higher absolute dollars in our legacy and acquisition businesses, we’re excited to see this move go back to the ’40s. As a reminder, it plummeted in the mid-30s when we acquired Agro in late 2020. Enhanced commercialization, including our ongoing engagement initiatives, is a critical component of our M&A strategy.
We look to the future to continue with this metric. Within our Global Warehouse segment, we have not had a significant replacement in the composition of our 25 most sensitive customers, who account for approximately 48% of our global warehouse profit on a pro forma basis. In addition, our turnover rate remained low at approximately 3. 3% of overall warehouse earnings, which is consistent with previous turnover rates.
As for our progression projects, our Dunkirk project, a facility committed to traditional design for a giant personal manufacturer of customer packaged products, went live this quarter. design with an initial term of 20 years. This is an excellent example of how we continue to work with our customers to locate tactics in their production and supply chains with critical long-term infrastructure.
In the current part of this year, we are completing one of two highly automated traditional structure services for an industry-leading global retailer. This facility is located on Pennsylvania. sites in operation, and will showcase Americold’s leading position as a premier operator and owner of highly automated sites for traditional retailers.
In addition, in the current part of this year, we are completing two traditional multi-tenant progressions in Ireland and Spain. Our business progression team has progressed in hiring new and existing consumers to fill pallet positions at any of the facilities.
Finally, I would like to thank our Americold associates, who allowed us to offer a successful 4th of July holiday to our consumers and end consumers. Our service and infrastructure offering continues to be best-in-class, and this resonates with our consumers. As we stated earlier, there will obviously be winners and losers as occupancy rates begin to recover. We are already seeing a build on the business with new and existing consumers across our portfolio.
Americold continues to be well placed to obtain a significant percentage of additional volume recovery based on our long experience in visitor service, state-of-the-art responses and a comprehensive and built-in network. to look for tactics for the power of their supply chains. Americold is committed to supporting those initiatives, and we remain grateful for the opportunity to facilitate the expansion of our consumers.
Now I’ll pass the ground on to Marc.
marc smernoff
At the moment, we reported an overall profit of $730 million, reflecting a year-over-year build-up of 11% and, as Rob mentioned, an expansion in all segments of our business, driven primarily through our Warehouse segment. The company’s overall RNE $168 million, an accumulation of 8%, reflecting an improved operating environment and investment activities, offset by higher prices and inefficiencies. Our company’s overall NOI margin decreased through 66 core issues to 23. 1%.
Corporate general, general and administrative expenses totaled $56 million for the current quarter of 2022, compared to $42 million last year. As we discussed in our last call, and in line with our expectations, we recorded increases in our annual performance – based on bonus expenses and equity reimbursement expenses, which were basically due to the one-time residual percentage allocation granted in the fourth quarter. In addition, 2021. De, as discussed and in line with our expectations, we recorded increases in our IT, insurance, legal and professional fees and expenses combined with other inflationary pressures, partially offset through synergies from recent acquisitions.
Core EBITDA of $120 million for the current quarter of 2022, a cumulative 1. 6% year-over-year. Our core EBITDA margin decreased through 160 core issues to 16. 5%. Our current quarter AFFO $74 million or $0. 27 consistent with consistent diluted percentage, compared to $72 million or $0. 28 consistent with the diluted consistent percentage in the prior year quarter.
I will now move on to our effects within our Global Warehouse segment. For the current quarter of 2022, revenue in the Global Warehouse segment was $564 million, an increase of 12% over last year. This expansion is basically due to our project pricing and advanced economic occupancy in the same group of stores, along with recently completed acquisitions and the increase in recently completed progression projects.
Net operating source of revenue for the warehouse segment was $151 million for the current quarter of 2022, a cumulative of 4. 6%. This accumulation is the result of the same points above, offset by a decrease in the contribution of our comparable store group. In addition, initial prices of approximately $2. 4 million similar to our progression projects also weigh on those results. The margin for the global warehouse segment was 26. 8% for the current quarter of 2022, 191 fewer core issues than in the same quarter last year.
I will now turn to the effects of our comparable retail outlets within our Global Warehouse segment. For the current quarter of 2022, revenue in our Global Same-Store Warehouse segment was $498 million, up 5. 9% year-over-year and 8. 1% at consistent exchange rates. This is due to higher rental income and garage and storage services.
Our actual effects were partially offset by the strength of the US dollar. Total source of operating income from comparable warehouses $144 million, up 1. 6% year-over-year and 3. 1% at constant exchange rates. garage activities, offset through a decrease in the contribution of storage services. The NOI margin for comparable global warehouses decreased 123 core issues to 28. 9%.
In the current quarter, global same-store garage and rental revenue increased 8. 7% year-over-year and 10. 7% at constant exchange rates. This is basically due to accumulation in price lists and significant accumulation in economic occupation. The economic occupancy rate of our points of sale to the same store 78. 1%, reflecting an accumulation of 288 basic problems compared to the economic occupancy rate in the current quarter of last year.
As George mentioned, the construction of the economics profession has been stimulated through the construction of a production of our food brands combined with changes in the purchasing behaviors of end consumers due to inflationary pressures. profit of rental and garage of pallets in constant currency, thanks to our pricing projects and rate increases.
Our total same-store hires increased by 10. 2% year-over-year and by 12% at constant exchange rates. This is due to the expansion of profits described above, offset by inflationary pressures on prices, the addition of electricity, maintenance of facilities, taxes on assets and other facilities. prices year after year. The NOI margin for the global same store garage increased through 82 basic problems to 61. 9% due to the same factors.
As we said earlier, the expansion in economic occupation contributes a lot to our overall effects. Sales of global same-store storage facilities for the current quarter increased 3. 9% year-over-year and 6. 2% at constant exchange rates. This earnings expansion was driven by our pricing initiatives, which increased our profits from same-store storage facilities in constant currency for pallet performance by 7. 9%. on the inflationary environment on the demand of the final consumer.
Margin on net operating income source for our same-store storage was 4. 6% for the quarter, down 375 foundation issues from the prior year. time it takes to exercise new affiliates in the Americold operating system, combined with the top charge of warehouse materials and other service prices due to higher inflation.
As for our recent investment activity, as George mentioned, we closed our Polish lease buyback for around €7 million on April 28. We closed our JV LATAM on June 1st. After the end of the quarter, we closed our Australian acquisition for approximately AUD 25. million on July 1. Finally, we closed the acquisition and renewal of our lease in New Zealand for approximately NZD 18 million on August 1. The acquisition in two lease buybacks was financed with a combination of money and our multi-currency revolver.
Let us now turn to our balance sheet. At the end of the quarter, total debt was at $3. 2 billion. We had a total money of $597 million, which consists of money and revolving money. Our net debt to pro forma core EBITDA is approximately 6. 6x. At this point, we have invested approximately $463 million in ongoing progression projects, reflecting only two rounds of leverage. We still have approximately $130 million to invest in ongoing progression projects announced over the next 18 months.
Let me now talk about our outlook for the rest of 2022. Our guidance for AFFO is consistent with a consistent percentage in diversity from $1 to $1. 10. While we are encouraged by improved economic occupancy and our ongoing pricing initiatives, headwinds persist affecting the backside line. Let me provide some additional comments on our advice.
In terms of profits and NOI, we expect the economic occupancy in our group of comparable stores to be one hundred to three hundred basic problems for the whole year. We expect flow volume to minimize between 1% and 3% for the full year. Given revenue expectations, combined with the inflationary environment and our ongoing pricing initiatives, for the full year at constant exchange rates, we expect the same-store earnings expansion to exceed our previous guidance.
We now expect it to be 3% to 5% positive. We also expect the NOI to grow. However, we expect this expansion to be 0 to 200 basic issues lower than the related earnings expansion. In the group of non-comparable stores, we continue to see an increase. while we try to stabilize our recently completed advances and the starting prices of our advances that will soon be finished. These are headwinds for NOI’s overall expansion of our warehouse segment.
Below the RNE level, at the end of the quarter, our exposure to variable rate debt is 30%. We expect continued headwinds similar to the buildup in base rates for the current part of the year. We expect continued headwinds similar to currency conversion due to the strengthening of the US dollar against the maximum of our company’s currencies. Year-to-date, our AFFO PER SHARE has been negatively impacted by approximately $0. 01 due to the exchange rate, which accelerated in the current quarter. .
Finally, please note that our address does not include the effect of acquisitions, divestments or activities in the capital markets beyond what was previously announced. See our additional IR for more important points on the additional assumptions built in. in those guidelines.
Let me now turn to George for some final comments.
George Chappelle
Thank you Marc. Overall, this quarter we made significant progress on our 4 short-term priorities. We have also noticed an improvement in the economic occupancy of our warehouses and continue to demonstrate that we can make the costs of our warehouses triumph over inflation. We still have a lot to do, but I need to thank all of our affiliates for their hard work and contribution to our performance. I’m incredibly proud of their efforts and can’t express my gratitude enough to them.
Thank you for joining us today, and now we will open the call for your questions. Operator?
Q&A session
Operator
Thank you. Now we will start the session of consultations and answers. [Operator Instructions] His first inquiry comes from Dave Rodgers. Continue.
David Bray
Marc, I wanted to start with the profit forecasts. Thank you for the other main points you just provided just now. I guess I wanted to dive in, you have 7% since the beginning of the coin year, and the consultant is actually 3% to 5%. So despite the parts you’ve given us, what’s the challenge you see in the current part of the year?It turns out that the rate keeps going down. bien. It already has a smart jump in occupancy. I know it’s a delay. It turns out that it’s too unconventional in the recommendation and maybe there’s a bit of conservatism. So I’d like some extra color, please.
marc smernoff
Oui. Je I think the color is that as we go through the year, our pricing projects actually start very late in the third quarter and accelerate in the fourth quarter. So as we go through the year, we pass – festival becomes more complicated due to the expansion of profits as we begin to oppose our pricing projects.
david bray
I mean, do you expect you to like wasting the occupation?Or has the improvement in occupancy at the time of year slowed down for you as you pay attention?
marc smernoff
No, it’s not so much. I think our full-year occupancy forecasts are more or less in line with what we have cited. We are looking for between one hundred and three hundred fundamental questions of the overall growth of employment year after year. But I think where the challenge is lies when you look at the actual rate, the rebate will start to decrease. So, you’ll get advantages of occupancy improvement on overall revenue, but reimbursement of revenue consistent with the pallet or consistent with the economically occupied palette becomes more complicated as we move through the year.
David Bray
It is ok. Perhaps a sequel for you, George. Je looked for after asking you with your crystal ball what you see as the trajectory of the recovery and stabilization of the company? I think you’ve already spoken, it may only take a few quarters, six or 8 trimesters. When you look at the manufacturers, when you look at yours and you’ve made progress and there’s still progress, what do you think is the trajectory of the company’s recovery when you look maybe at the end of this year or over the course of next year, et cetera?
George Chappelle
Well, it’s transparent to me that full recovery is not this year. I mean we’re seeing an improvement in the workforce, but I see it more as a net flow than a stable one. has higher through a minimum amount. I think the call from the customer to be a little down is helping to build up stock. I think this is a smart thing for the food source chain in the short term. But I don’t see a full recovery this year, and I would even delay it until the middle of next year, if I had to guess.
Operator
The following is from Mike Mueller of JPMorgan. Continue.
michel muller
I only have one question. You were talking, I suppose, about higher inflation, which leads to adjustments in customer behavior and maybe an accumulation of inventories because fewer goods are bought in stores. you don’t buy food in the store, you see it leaving food establishments and restaurants, and so on. I mean, how do we think about this dynamic?
George Chappelle
Well, I think customer demand is definitely going to be affected by higher inflation, a decline in disposable income, and other people are moving down. I think, historically, in my experience, other people fall into categories that charge less, but offer nutritional benefits similar to the ones you just described. The good news for us is that we inventory and ship products that belong to categories where other people are engaged in the industry compared to periods like this. So I don’t know if it will necessarily be a big drag on our business. But certainly, customers have less cash to spend. And consequently, we will make other possible choices than they used to do just a few months ago.
marc smernoff
I also think, Mike, the other thing that weighs on this is that there’s. . . because of the inflationary environment, you have a tendency to see smaller basket sizes, which I think we’re starting to see in the store report. And you’ll see less pantry garage than we’ve noticed the COVID cycle as inflation weighs on the average consumer.
michel muller
And for a quick follow-up, can you tell us about occupancy trends for July?
George Chappelle
Yes. Good question. July trends are in line with our forecasts. We are seeing a year-over-year improvement in occupancy within the diversity on which we have updated forecasts. So, as we said in the ready comments, we look forward to this. to continue the year and July actually confirms it.
Operator
The following is by Michael Carroll of RBC. Please continue.
michel carroll
I looked to go back to the orientation factor. And it turns out that in 2021, which was a distinctly difficult time, I mean you earned around $0. 57 from AFFO, but now your recommendation applies to around $0. 52 in 2022, despite a fairly significant build-up in the occupancy rate, you can transfer the higher hard work costs. I guess it’s the disconnect? I mean, why would affO 2022 fall under what it is in 2021?
marc smernoff
As we discussed in our ready comments, we are very pleased with the progress of the core business in terms of NOI growth, but there are headwinds, adding a higher interest rate environment, which creates higher interest rates, and the strength of the United States. dollar, which has a conversion effect on the profits of our operations.
michel carroll
Can you quantify the magnitude of the currency effect you expect to see in 2022?Do you subscribe to more exchange rate or movement than has already occurred?
marc smernoff
So, as I mentioned in the comments above, since the beginning of the year, FX has charged us around $0. 01 per share, but in fact has noticed that the dollar rises as we go through the – or over the course of the quarter. . So I think the ones who are the main drivers. We also have, as we discussed above, and you can see it in our tips, some other detail under NOI is also SG
Operator
The next one comes from Samir Khanal with Evercore. Continue.
samir kanal
I guess, George, you said that electric power costs are high and increase costs for visitors. , to the same visitor and cancel the higher costs in case the costs remain high and inflation is worse than we think?I mean, can contracts be transferred and cancelled?
George Chappelle
Yes we can. In fact, we have already done it 3 or 4 times. And if it takes a 5th time, we will. As we said, it is not exactly the same depending on the inflation we are seeing. Thus, electric energy supplements appear directly on the bill. This is not a negotiation to which the industry is conditioned, and we provide the knowledge to consumers who support adjustments when we do.
It’s a very elegant process, it only takes 30 days to implement. Labor inflation, we’ve highlighted the other strategies we use, whether it’s in our most sensible hundred or outdoors in our most sensible hundred, yet we’ll do it a fifth time, if necessary. It is: we have said that we are committed to not allowing inflation to structurally replace our margin structure, and we are as committed today as we were when we first made this statement.
samir kanal
It’s bien. me they gave it AND then, I guess, in a previous consultation about their company’s defense in a recession. I mean, I guess what do you think of the tips for integrating this slowdown?And even if we think about 23, on the right, we’re not even kind of. . . I mean there’s an opinion that, yes, maybe there’s a possible recession here. But from the point of view of the models, does it seem that this diversity continues to decrease?Or what kind of assumptions are we going to go through some kind of recession in the next 12 months, if that were to happen?
George Chappelle
So, I guess if you take a look at our business, our business would be aligned with the food industry in terms of the recession, which I hope is possibly not happening or not being a deep recession. But the hallmarks of our business are that we generally buy and transmit food products that are in the middle of Walmart’s eye, in the middle of The Eye at Kroger.
These are regular categories in which other people work in times of recession rather than because of value levels. And it is also believed that if a recession were to occur, hiring could increase or the availability of other people would increase. to say that no company that I know of is enduring the recession, yet the food industry and our component of it tend to be somewhat recession-resistant.
marc smernoff
And I think, at this point, our forecasts for decreased pallet flow reflect our view on the effect for the rest of the year.
Operator
The next one comes from Joshua Dennerlein of Bank of America. Continue.
Joshua Dennerlein
I’m just looking to get an idea of the effect of the macroeconomic environment based on your advice. What is the effect of emerging interest rates?What did you take into account in the last quarter compared to this quarter??
marc smernoff
On second thought, based on how much floating-rate debt we have for about a full year, a hundred basis point movement in the interest rate would be about $10 million of additional charge, so it will help you get a metric. .
Joshua Dennerlein
Therefore, a motion of one hundred foundation problems over 10 years represents $10 million for the full year. So you. . . you. . . ?
marc smernoff
Yes, a hundred basis point replacement in base rates would translate to $10 million over a full year.
Joshua Dennerlein
It’s okay. And what is the base rate? Is it SOFR or like. . .
marc smernoff
In fact, SOFR.
Operator
The next one comes from Ki Bin Kim with Trust. Continue.
ki bin kim
He just wanted to go back to his comments about the Occupation in July. He was only curious about the resumption of the economic career and the situation of the labor force. What does this cadence look like throughout the quarter?There is a detail of seasonality in your business. Therefore, it is difficult to take a look at the numbers at face value. So if you can provide a little bit of color around that.
George Chappelle
So in June, in the current quarter, we went up 288 core issues year over year. We have revised our occupancy orientation to be one hundred more basic problems than 300 basic problems for the whole year. And July is well within that range. Therefore, we expect to meet the revised occupancy forecasts. And if you extrapolate that, we’ll be between a hundred and three hundred higher base problems from month to month for the rest of the year.
ki bin kim
And he argued that the full effect of the expense transfer was not reflected in P2. Can you talk about the additional benefits out there, regardless of the measure you’re considering?
George Chappelle
Yes, what we are saying is that in the current quarter we still experience inflation in labor, warehouse materials, and electricity. both one and both in account, in the quarter of the moment. So, there are costs in the third quarter that offset the inflation that continues in the third quarter. And since we’re experiencing more inflation in the third quarter, we’re going to set prices in the fourth quarter. So, essentially, we are a quarter with one and both inflationary elements.
ki bin kim
It is ok. And if I can insert a third, their forecast for the profits of the same store is 3% to 5%. Since the beginning of the year, it has already obtained 7%. A little more make a profit by making a full impact on expense pass-throughs. Their forecasts mean about 1% profit in the same store in the middle of the moment. I mean, I’m looking to get an idea, is it just to be careful?because even diminishing return, I don’t think, can take its — and it’s hard to believe to make a 1% profit in the same store at the middle of the moment.
George Chappelle
Oui. Je, in fact, I think performance, we don’t expect to have that point of impact. That comes down to the fourth quarter of last year, with a lot of costs in that quarter. That’s necessarily when our price measures started hitting corporate in the fourth quarter of last year. So, when comparing the fourth quarter, the accumulation of profits year after year will decrease. And it is this detail that leads us to consult ourselves up to this point.
Operator
[Operator Instructions] The following is by Craig Mailman of Citigroup. Continue.
craig postman
I don’t need to speak for everyone on the call, however, it turns out as a constant issue that we are all looking for a bridge, right, why do you continue with the advice?Because as I listen to you, you had $0. 53 in the first part of the year, and I know you can’t annualize the business because, however, if you think about some kind of fourth quarter compared to the first quarter, the occupancy rate is going to a few hundred basis points, as are your prices.
I perceive that there will be a delay in the company’s electric power supplement. You’re going to have the company’s floating rate debt, anything in FX. But on the other side of the coin, if the customer slows down, your tenants will have a chance to build stock faster than you think, right?
Your performance activity may not be that high, but at least from an economics profession consistent with the perspective, you may have some strength, something on the rise there. So, I guess what I’m going to say is that, again, I know you’re referring to that kind of $0. 52 that brings it to 105 in this part of the year. And I just wanted to try to put numbers into action on some of the brakes. the debt is equivalent to $10 million. It’s about $0. 04 on an annual basis, so it would possibly be a $0. 01 inventory trail consistent with the quarter and something similar on FX, right?
So consistent with maybe you get $0. 02 consistent with a consistent percentage with a quarter there. But on the other hand, you get consistent consistency the other way around. So I know it’s a long preamble there, but I’m looking to reach a bridge through sharing to weigh on people. . .
marc smernoff
Yes, I can check to intervene and complete some of the other elements besides those we have already mentioned. I would take a look at the timing of our maintenance capital expenditures. You’ll see our maintenance capital expenditures compared to our full-year forecasts increase markedly in the current part of the year, and that’s it: our forecasts mean we’re expanding those expenses compared to last year as our asset base has grown.
We also, if you remember, in our rules for the initial year, commented that there will be upfront costs. And obviously, as we get closer to the end of the year, given what Rob has been saying about the big projects starting to happen live, we’re starting to start to see a greater burden of progression projects in terms of upfront start-up costs. These are just some of the elements, in addition to the other comments we have mentioned, that put some tension at the time part of the year.
George Chappelle
and the S. G.
marc smernoff
Yes she is.
craig postman
Correcto. No, I get it, but it’s kind of: you’re talking about an overview, I’m looking for genuine affections through action. to close the gap, right? Like filling up a lot of stuff on the side of the headwind. But to verify, and I’d also like to see that in Q2 you didn’t get a quarter of the value increases, right?So it will continue. As for the electrical overload, you are 30 days late, right?
Therefore, it will recover a part of the year. So what is the real impediment to this?And then Dunkirk, I perceive that it is becoming a brake, however, you have conditioned the street with the J turn in the NOI in line. And so it deserves to be in the kind of idea procedure of people. So, I’m just wanting to think about what is incremental, this gets you going from $0. 53 to $0. 52 with better basics and the ability to re-qualify.
marc smernoff
Yes. Craig, as I said, I would first take a look at the timing of maintenance capital expenditures. If you look at the midpoint of our guide, this is an accumulation of about $12 million from the back over the front. That’s where if you think about our notable weighted average stocks between $0. 04 and $0. 05 right there. It is only the moment when this capital is deployed.
Operator
The next one comes from Bill Crow with Raymond James. Please continue.
Bill Corbeau
George, could you get any explanation before asking my question?I heard that he referred to the current quarter of 2023, it was a stabilized point. , was it the occupation? Because I think the time of recovery has accelerated a bit and possibly it would be mid-23 when we were in NAREIT, but you can also tell me what you mean?
George Chappelle
Oui. Je I think the context of the factor, in particular, the hard work market, and my comments were, I don’t see the hard work market going back to, say, completely normalized pre-COVID grades this year for sure. And I’m very skeptical. This will also take place in the first part of next year. I think it takes a long time to rehire the other people we’ve lost, and now I speak from the attitude of the industry, the food industry. And then you have to exercise them.
You have to make them stay. Rotation, as we discussed in our previous comments, is a challenge when other people can work in this environment and then notice that they actually can’t. And then all of this has to stabilize. And I don’t see any stabilization in the degrees of painters who were in the food industry before COVID so far part of next year. That was the context of the comment.
Bill Corbeau
It is ok. And then we assume it will be even beyond that before, say, the occupancy rate returns to 2019 grades and margins improve, right?It looks like this would delay the stabilization of the workforce. Is that fair?
George Chappelle
I think that’s right. I mean, you see some improvement when we go back to the levels of some, but it takes time, right?You have to: the most important variable is when the workforce becomes as productive as it was before COVID. The numbers may – from other people hired may be at levels, but productivity is a big part. So I agree with that, yes.
Bill Corbeau
It is ok. And then, thank you for the explanation, the explanation in several parts. But one question for you is: when it comes to increases in operating charges, does the derivative of the moment have to fall?Have we passed the peak in terms of load increase rate?
George Chappelle
I don’t know if we have passed the peak, but it is replaced a bit. And it’s vital to know what geography you’re talking about. So, in the U. S. , it turns out that the inflation of hard work has decreased to some extent, however, warehouse supplies, which are most likely driven by the hard work of our suppliers, and strength have increased. So, it’s kind of a combined replacement there.
Europe, our European company, is now in the midst of labour inflation. It lags behind the United States, but now it’s there, and we’re treating it in exactly the same way we did in the United States. But in addition to the increasing strength that we have talked about in the past, Europe is now experiencing significant labour inflation. So, it’s a bit of a mobile target. But as far as painting in the United States is concerned, I would say yes, to some extent it has declined.
Operator
The next one comes from Vince Tibone of Green Street Advisors. Continue.
vince tibone
Looking at page 27 of the supplement, economic occupancy is higher in the current quarter of this year compared to Q2 ’19. I perceive that the portfolio has replaced this period a lot. But what I’m looking to perceive is perhaps how much occupancy do you think it can be compared to existing grades once food production grades normalize?
George Chappelle
Well, again, we have our one hundred to three hundred basic numbers above an annualized basis. So, we don’t think we’re going to go beyond that or we’d have it higher. So, for this year, between a hundred and three hundred foundation themes are coming ashore. We are sure of that. And ideally, the viaput increases, doesn’t it?I mean when the formula is normalized and through the formula, I mean the food source chain, you deserve to see more production from manufacturers. You deserve to see an increase in occupancy, but you also deserve to see an increase in viaput, and that hasn’t happened. Then that would eliminate the stock to some extent. So you have to keep that in mind.
vince tibone
But only, from what it still has, I mean, I’m looking to look at maybe for 23 years and more, as if I feel like there’s a structural profession on the rise in food production. Do you see what I’m looking at to say?
George Chappelle
Well, we said I would refer to the gain in occupancy that we have achieved recently, we said that there are two factors: the accumulation in production and the slowdown in customer demand due to the decrease in the available source of income of the average customer today. This dynamic is expected to be replaced over time. And when we normalize, we return to inventory grades that reflect not only superior production, but also superior yields driven by normalized customer request. So, I’m not sure I’m answering your query correctly.
vince tibone
No, it is useful just to clarify. So since it adjusts seasonally, as in the current quarter, do you think for a current quarter, do you think it’s higher or lower or roughly the same stabilized occupancy rate once everything normalizes relative to the genuine one at the time?quarter of this year.
George Chappelle
It’s hard to say. I’m not sure I can expect that, to be honest. I can say I wouldn’t expect it to be worse, let’s put it this way.
Operator
The next one comes from Anthony Powell of Barclays. Please continue.
Antonio Powell
Question about the dating between, I suppose, the final customer demand and production. And right now, you see a merit in customers buying less, but in the medium term, shouldn’t that translate into less production because there’s less to buy?if we enter a recession, does that mean there will be more pressure on end customer demand?
George Chappelle
Oui. Je think: the first question, I think brands still have a long way to go in the production aspect before they are happy to have reached stock levels that not only meet the needs of customers, but allow them to manage their services efficiently. truth? So there’s a lot of space. I discussed earlier that the improvement in occupancy we’ve noticed is more of a network than something substantial. So I think there’s a lot of room. And, in fact, I expect the customer’s call to answer. I mean, in the end it will bring the food supply chain back to pre-COVID levels. So I hope it’s a short-term problem, not a long-term problem. .
Antonio Powell
Maybe in the workforce, the turnover you see. We’ve noticed a lot of ads about laid-off or laid-off warehouse workers, yet you still seem to see a lot of turnover in your business. When other people leave your facility, where do they go? And I guess, how do you see the evolution of the competitive workforce landscape in the coming quarters?
George Chappelle
Well, the first consultation is when they leave us, I don’t know where they are going. I can’t answer that. But I think the task market will still be very competitive. I think I discussed at least the first part of next year. that the environment is harder than they thought, we face it all the time.
We have systems to deal with this with bloodshed acclimatization systems and increased onboarding processes, but we want a larger employer of choice. We want to have better integration practices. We want to have greater registration practices with employees. We are strengthening all of those processes now, however, they will remain competitive, and I hope that rotation will be the biggest challenge we will face at the time of next year, at the time part of this year and in the first part of next year.
Antonio Powell
Is it harder for your new breakthroughs compared to your kind of legacy breakthroughs?Or is it the same clutter in any of the wallets?
George Chappelle
It’s an absolutely different dynamic. Most of our new advancements incorporate some form of automation, which means you rent formulas, professionals, IT professionals, engineering professionals where our more traditional amenities have been in the formula for much longer.
We rent out the hard work per hour that’s being done: over $20 per hour of hard work that will do a lot more tasks manually than automatically. So, the two absolutely different skill sets in two absolutely different markets, either of which is difficult to locate people. , although for other reasons.
Operator
This concludes today’s Q&A consultation and convention call. Now you can disconnect your lines. Thank you for your participation and have a good day.