World: United Malt reports disappointing annual results, believes beer won’t go flat in a recession

United Malt says history shows beer sales do not dry up in recessions as it rewrites supply contracts with big brewers and looks to get back on track with banks, AFR reported on November 15.

The company is adamant it will not need to raise additional capital after what chairman Graham Bradley described as a disappointing year when it needed to reach an agreement with its bankers to amend net debt to earnings covenants after being in breach.

United Malt was hit by barley supply issues in North America in the past year but now sees recession and the potential impact on beer demand as the bigger risk in 2022-23.

Chief executive Mark Palmquist said United Malt was keeping a close eye on inflation, rising interest rates and recession risk in key markets, but history showed beer sales did not go flat.

“In past recessions, beer consumption actually will marginally improve, it doesn’t go down,” he said.

Mr Palmquist, who has one foot out the door at United Malt after announcing his intention to retire, said sales of craft beer even tended to improve.

He said having a “pint or two of craft beer and some pretty cheap food at the same time” was a low-cost way to socialise in times of financial stress.

United Malt announced a net profit after tax of A$11.6 million for the full year to September 30, down from A$14.6 million in 2020-21.

It reported underlying earnings before interest, taxes, depreciation, and amortisation of A$105.9 million, down more than 23 per cent on the previous year but in line with a downgraded guidance issued in August.

Net debt climbed from A$427.3 million at March 31 to A$453.4 million.

The fourth-biggest global supplier of malt to the beer and whisky industry has forecast underlying EBITDA of A$140-160 million in 2022-23 driven by improved barley crops in North America and success in passing on increased costs through new contracts with its beer brewing and whisky distilling customers.

The company is continuing its hunt for a new chief executive to replace Mr Palmquist, who is bowing out almost three years after leaving the top job at GrainCorp as part of the demerger that created United Malt.

Mr Bradley said the board shared shareholders’ disappointment with the company’s financial performance in 2021-22.

“We acknowledge the need for the company to do better, to execute the actions needed to make our business more resilient to future shocks and to do so effectively and quickly,” he said in the annual report released on Tuesday.

Mr Palmquist said there remained concerns about barley supply from the Black Sea because of Russia’s war on Ukraine and the impact of adverse weather on crops in Australia and Argentina.

However, more barley has been harvested in North America than last year when the United Malt operations had to import barley from Australia. In Canada, it is estimated 9.7 million tonnes of barley were harvested, up from 6.9 million tonnes, and in the US harvest produced about 3.8 million tonnes.

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