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CASTLE MALTING NEWS en colaboración con www.e-malt.com Spanish
12 February, 2023



Malting news Australia & Canada: United Malt Group assures investors FY to 30 September will bring improved financial results

Commerical maltster United Malt Group assured investors at its AGM on February 10 that its financial year to 30 September 2023 will bring improved financial results compared to the dismal earnings in FY22, the Grain Central reported.

UMG reported a drop of 23pc in earnings before interest, taxation, depreciation and amortisation in the FY22 results released in November last year.

The company’s net profit after tax fell 20pc from A$14.5M in FY21 to A$11.6M.

This came after GrainCorp announced a record EBITDA and net profit after tax in its FY22 results.

UMG was a subsidiary of GrainCorp’s until a demerger in March 2020.

The similarities of the two companies had one shareholder questioning the stark difference in financial outcomes and what had been done to mitigate future losses.

UMG chairman Graham Bradley said both companies were exposed to different risks in FY22, with the poor Canadian crop heavily impacting supply of barley to its North American customers.

“We imported barley from Australia and Denmark into Canada, which is one of the largest barley-growing countries in the world,” Mr Bradley said.

“[It was an] unprecedented requirement in order to continue to serve our brewing customers, but we weren’t able to pass those freight and additional costs on to the customers.”

He said COVID-19 lockdowns had impacted sales of craft beer due to the closure of hospitality venues as well as causing supply-chain disruptions.

He said UMG was “confident that those headwinds have largely abated”, although not entirely.

“We still have high energy costs around the world compared to three years ago, we still have some freight dislocation in supply chains but not as bad perhaps as it was last year.”

Mr Bradley said the company was progressively introducing new contract terms with major customers which will “will reduce our risk exposure to barley supply, quality and prices and to additional energy costs and freight surcharges”.

UMG managing director and CEO Mark Palmquist said this also included increasing the frequency of malt pricing to take quality and the current market value into account.

“We are also progressively including more frequent freight-price adjustments and inflation cost escalation in our customer agreements,” Mr Palmquist said.

He said UMG has also entered into a derivative contract to mitigate risk with the Canadian barley crop yield.

“The purpose of the contract is to provide additional financial risk mitigation for our processing operations in Canada, in periods that may experience significantly reduced barley crop yields.

“While we have certainty over our crop requirements for the current year, this contract will provide additional risk mitigation to manage the effect of a potentially reduced barley crop yield in our customary barley origination provinces in Canada in FY24.

“Had this contract been in place in FY22…United Malt would have received a payment of Canadian $30M, which would have significantly increased FY22 earnings.”

Mr Palmquist said the company remained vigilant about high levels of inflation across the US, Canada and Australia, and the possibility of a recession in these countries.

“Beer remains a significant beverage category and beer consumption has not typically been significantly impacted in periods of recession.

“During the past few weeks, major international brewers have pointed to demand generally remaining resilient on a value basis.

“However, some brewers have reported potential risk of softer demand and down-trading as consumers respond to inflation and recessionary concerns.”

He said UMG would continue to monitor the situation and the potential effects on malt demand.

“While we have seen a small reduction in our volumes in the first quarter, this has been offset by improved pricing and commercial terms.”

Mr Palmquist said malt whisky production and demand for distilling was “expected to continue its upward trend”.

“[O]ur customers’ demand in Scotland remains robust, with approximately 98pc of the new volume already committed for this year, and the majority under long term agreements for future years.”

Alongside contract improvements and continuing demand, UMG has also predicted a “significant improvement” in the barley crop yields and quality in North America.

Mr Palmquist said these factors made the company confident in sticking with its earnings guidance figure released in November.

“Our guidance for FY23 has not changed since the release of our full-year results in November and we continue to expect underlying EBITDA (before SaaS costs) for FY23 to be in the range of A$140 to A$160 million, assuming no material deterioration in market conditions.”

In October Mr Palmquist indicated he would be stepping down from the managing director and CEO roles during FY23.

Mr Bradley confirmed that the board was “well progressed” in searching for a person to fill the position and said the focus was on candidates based in North America.

“We will make further announcements on this process as soon as possible.

“Meanwhile, Mark will remain in his role until his successor is appointed to assist with an orderly transition.”





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