World: United Malt seeing contrast between recovering markets in North America and Europe and low vaccination rates Asia and Australia

United Malt says there is a stark contrast between its recovering markets in North America and Europe, where there are high COVID-19 vaccination rates, and its struggles in Asia and Australia, where jab rates are lower, the Financial Review reported on September 2.

The global malt supplier is finding it hard going amid outbreaks of the delta variant and associated lockdowns in Australia and Asia, where it has cut off one 20-year customer with a A$16 million bad debt on their tab.

United Malt also expects to be left out of pocket by millions of dollars by the collapse of long-term grain storage contractor Alexander Inglis & Son in Britain.

Speaking after a market update, United Malt managing director Mark Palmquist said the company did not expect a material recovery in the Asian and Australian segments of its business until vaccination rates increased and COVID-19 restrictions started to lift.

In contrast to Asia and Australia, Mr Palmquist said North American beer consumption was rebounding and entertainment venues remained open even in the face of delta outbreaks because of high vaccination rates.

“We are seeing a somewhat different picture in Asia and Australia,” he said. “These markets have lower vaccination rates and have been impacted more recently by the COVID delta strain that has caused increased lockdowns.”

While beer consumption is bouncing back in North America, a poor grain harvest there means United Malt – spun off from GrainCorp in March 2020 – faces having to import barley to feed its malt plants.

Some of that barley could even come all the way from Australia and be sourced from GrainCorp as it gears up to handle a second consecutive bumper harvest.

Mr Palmquist referred to the big crop in the ground in Australia in saying United Malt would rely on imported barley in North America.

“While crop conditions in North America have deteriorated due to the drought conditions which have impacted barley crop size and quality and have also elevated barley prices globally, we remain well-placed to meet these challenges,” he said.

“We source barley from multiple growing regions and our production facilities are located close to transport infrastructure.”

United Malt is forecasting full year underlying net profit after tax of A$36 million to A$41 million and underlying earnings before interest, taxes, depreciation, and amortisation of A$129 million to A$134 million.

The company’s share price fell more than 6 per cent to A$4.12 in trading on September 2 following the market update.

The restrictions in Asia have flowed on to affect malt plants in Australia, where the business is counting the cost of the lockdowns in New South Wales and Victoria as pubs remain closed.

“Performance in Australia is being negatively affected by recent COVID-19 restrictions, including the extended lockdowns in NSW and Victoria, with subdued domestic demand in both our processing and warehouse and distribution segments,” Mr Palmquist said.

“In addition to the continued impact of global freight delays and higher freight costs, COVID-19 conditions in Asia are causing a reduction in malt sales to the Asian export market from both our Australian and Canadian operations.

“We do not expect a recovery in export sales to the region until freight disruptions fully dissipate and COVID-19 restrictions normalise through higher vaccinations rates in the region.”

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