Cold storage facility operator Americold Realty Trust (NYSE: COLD) said manufacturers still aren’t producing food products at pre-COVID levels and recent production activity isn’t keeping pace with demand. Food producers’ inventory is “literally being eaten into,” said Fred Boehler, president and CEO, on a Thursday evening call with analysts.

Demand for food and food consumption remains steady. However, food stocks held by Americold on behalf of its manufacturing customers, as well as food inventories around the globe, have been drawn down as manufacturing operations have been curtailed during the pandemic.

The supply chain disruption weighed on Americold’s throughput and storage revenue during the first quarter as manufacturers are “failing to meet the needs of retailers today,” Boehler continued. Occupancy fell 430 basis points year-over-year to 77%. Elevated inventories in the first quarter of 2020 also hurt the comparison.

The Atlanta-based real estate investment trust reported adjusted funds from operations of 30 cents per share for the 2021 first quarter, which was in line with consensus. A net loss of $14.2 million in the period compared to net income of $23.5 million in the first quarter of 2020. Increased acquisition and integration costs were the culprits.

In 2020, the company executed $2.6 billion in acquisitions, which brought 342 million cubic feet of space to the network. Americold has completed three deals since the beginning of 2021.

Warehouse revenue increased 27.4% year-over-year to $486 million as the number of throughput pallets, including acquisitions, stepped 16.2% higher and services revenue per pallet increased 6.9%. The increases were the result of recent acquisitions as the company operated 61 more warehouses compared to the year-ago period.

“These increases are partially offset by the continued impacts of COVID-19 and resulting supply chain disruption, which impacted our throughput and lowered holdings across our network as production has been unable to keep up with steady consumer demand,” the press release read.

The additional revenue from acquisitions masked a 1.8% year-over-year decline in same-store warehouse revenue.

Boehler said recent conversations with Americold’s food manufacturing customers indicate production is ramping higher. Some of the company’s clients have also said they plan to take on incremental safety stock in the future.

“With the rollout of the vaccine and continued reopenings, we are seeing food manufacturer activity begin to ramp up again, which should result in more normalized inventory levels,” the press release stated. The company said business activity accelerated late in the first quarter and has continued so far in the second.

The company reaffirmed its full-year 2021 guidance for adjusted FFO to be in a range of $1.36 to $1.46 per share, compared to the current consensus estimate of $1.36 per share. The company reported adjusted FFO of $1.29 per share in 2020.

Americold ended the quarter with $1.5 billion in total liquidity and total debt of $2.8 billion, $2.5 billion of which is tied to real estate. Including the earnings before interest, taxes, depreciation and amortization expectations from recent acquisitions, net debt-to-pro forma EBITDA ended the quarter at 4.8x, up from 4.4x at the end of the 2020.

The company’s first-quarter results were accidentally released approximately 30 minutes prior to the market close Thursday. Americold’s shares fell 1.5% following the report to close down 2% on the day. The S&P 500 was up 0.82% Thursday.

Americold owns and operates 242 cold storage facilities with more than 1.4 billion cubic feet of space in North America, Europe, Asia-Pacific and South America.

Table: Americold’s key performance indicators

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