United Malt’s profit downgrade saw its share price tumble, as the one of the world’s largest malt suppliers and distributers grappled with poor crops, elevated supply chain costs, and inflationary pressures.
The “significant deterioration” of the North American barley crop, supply chain disruptions, increased costs of barley that couldn’t be passed on the customers, and inflation had significant impacts on the company’s performance.
United Malt expects underlying earnings before interest, tax, depreciation, and amortisation to be in the range of $100 million to $108 million for the year ended September 30. This compares with the previous forecast of $115 million to $140 million.
The profit downgrade caused a 17 per cent slide in its share price and $188 million lost in sharemarket value.
United Malt said anticipated improvement in the second half did not materialise as the cost and poor quality of domestically sourced barley caused increased production costs and a reduction in gross margin.
An expected improvement in the supply chain including sea, rail, and road freight, also didn't occur and there were also higher than expected energy costs.
Looking ahead, the company said production in North America looked positive as changes to pricing and commercial agreements in the region would come into effect in 2023 and better reflect the true costs for the company.
United Malt is also expanding its Scottish operations which would provide 79,000 tonnes to the distilling market. That is expected to deliver an incremental EBITDA of around $18 million on a full year run rate basis.
Company chair Graham Bradley said the board was disappointed with the company’s performance and outlook, saying, “the pace of change in the business needs a material reset to ensure we meet the expectations of our customers and of our shareholders”.
CEO Mark Palmquist reassured the market saying, “Better customer contract management and barley procurement will substantially improve results from January 2023”.
Palmquist said the company didn’t expect to have to import barley into North America in FY23, and the FY23 forecast was for underlying earnings of between $140 million to $160 million.
United Malt is the worlds fourth largest commercial maltster, with roughly 1.25Mtpa of capacity across 12 processing plants in Canada, the US, Australia and the UK.
United Malt’s CFO Amy Spanik resigned in July, after 12 years with the group. She assumed the CFO role when the company demerged from GrainCorp and listed on the ASX in 2020.
Ryan Dutcher will act in the role while a search for Spanik’s replacement is undertaken. She will stay on for three months. Dutcher had been a senior consultant to United Malt’s finance group since the beginning of the year.