WDP Earnings Call: Strong Growth Amid Challenges

Warehouses De Pauw SCA ((BE:WDP)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call of Warehouses De Pauw SCA (WDP) painted a generally positive picture, highlighting strong leasing activity and a robust investment pipeline. While these factors indicate promising future growth, the company also acknowledged concerns about temporary vacancies and rising debt costs.

Strong Q1 Performance

WDP reported a strong performance in the first quarter, signing 165,000 square meters of new leasing contracts across all segments. This indicates a robust demand for logistics real estate. The company also achieved a high retention rate of 80%, compared to the usual 65%, suggesting early signs of recovery in the market.

Significant Investment Secured

The company secured over €300 million in new deals, contributing to an €800 million fully funded investment pipeline. Impressively, more than 80% of this pipeline is pre-let at a net operating income yield of 6.7%, underscoring the company’s strategic investment approach.

Positive Letting and Occupancy Trends

WDP’s letting activities included significant deals in Romania and the Netherlands, particularly in the food industry. These sectors are showing resilience and growth potential, contributing positively to the company’s occupancy trends.

Strong Earnings Growth Outlook

The company is optimistic about its earnings growth, projecting a 15% cumulative EPS growth by 2027. This outlook is supported by the #BLEND2027 plan and a fully funded investment pipeline, positioning WDP for sustained financial performance.

Temporary Increase in Vacancy Rate

Despite the positive outlook, WDP anticipates a temporary increase in the vacancy rate, which is expected to negatively impact organic growth by 150 basis points in 2025. This is a critical area the company is monitoring closely.

Challenges in the Automotive Sector

The automotive sector, a smaller part of WDP’s portfolio, is facing challenges due to electrification and changing industry dynamics. While this sector’s difficulties are noted, they do not significantly impact the overall portfolio.

Rising Cost of Debt

The average cost of debt for WDP increased by 40 basis points over the quarter, now standing at 2.3%. This rise affects the company’s financial flexibility, presenting a challenge in the current economic climate.

Forward-Looking Guidance

WDP’s guidance reflects a cautious yet optimistic outlook amidst a volatile geopolitical and macroeconomic environment. The company plans to maintain occupancy above 97% and targets a cumulative EPS growth of 15% by 2027. This guidance underscores WDP’s strategic focus on sustaining growth and stability.

In summary, Warehouses De Pauw SCA’s earnings call highlighted a positive sentiment with strong leasing activities and a solid investment pipeline. While challenges such as rising debt costs and temporary vacancies were noted, the company’s strategic plans and optimistic growth outlook provide confidence in its future performance.