Australia: United Malt facing export risks due to global shortage of empty shipping containers

A global shortage of empty shipping containers and freight restrictions, caused by the coronavirus pandemic, are undermining export earnings for some big Australian grain sector agribusinesses, the Queensland Country Life reported on February 18.

While farm and food sector equipment importers have struggled for at least six months to get containers landed and cleared from major Australian ports, United Malt Group has reported its containerised exports have been significantly disrupted globally.

In some cases the backlog of product awaiting shipping has forced United Malt to periodically halt production at its plants around the world.

Shortages of food grade containers have also been variously blamed on greater demand by Chinese exporters, a massive reduction in air freight putting more pressure on seaboard terminals, and a surge of export orders for containerised pulses and other grain after this summer's big Australian harvest.

United Malt warned its shareholders how coronavirus shipping and social distancing restrictions, and sales setbacks relating to reduced beer consumption in bars and restaurants, were likely to stay challenging throughout the 2020-21 trading year.

The Australian-based global business owns three Barrett Burston malting plants, and Cryer Malt distribution centres in Australia and New Zealand, plus operations in Britain, Canada and the US.

Managing director Mark Palmquist told the company's annual general meeting while cautiously optimistic about a recovery in malt demand, the overall business outlook remained uncertain for the second half of the year.

This was particularly in light of the pandemic's second and third wave restrictions in core markets such as Britain and North America.

Also eroding United Malt's bottom line has been the rising Australian dollar, up from an average US67 cents in the first half of last financial year to an average US75c so far in 2002-21.

Mr Palmquist told investors overseas earnings were likely to be negatively impacted by about $6 million in the first half when they translated into Australian currency.

United, which became a standalone listed entity in March last year after breaking away from GrainCorp, has also predicted its corporate costs relating to the demerger, including significant insurance costs, will total about A$12 mln in 2020-21.

A further A$5 mln was also likely in expenses associated with accelerating the simplification of organisational structures and developing new projects to underpin its transformation.

Last week United Malt announced it was improving the efficiency of its operations in Britain by closing its Grantham malt house, employing about 15 full-time staff, and transferring production to its Abroath and Witham sites, incurring redundancy costs of about A$1 mln.

Mr Palmquist said the impact of Grantham's closure costs, transformation expenses such as renewing the company's technology platforms and the foreign exchange impact were likely to result in earnings before interest and tax and amortisation between A$47 mln and A$50 mln at the end of the first half.

He was confident the roll out of COVID-19 vaccines in key markets and the company's strong market position with a strategically located portfolio would position the company to return to growth once conditions stabilised.

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