United Malt Group, the spin-off from GrainCorp has marked its first results as an independent company with a $165 million capital raising and a hint that demand for its barley-based products from the beer and whisky industries might be weakening.
United Malt says it wants to raise $140 million via a fully underwritten institutional placement, with the new shares priced at $3.80.
This represents an 11.4% discount to the company’s last traded price of $4.29 on Wednesday.
United Malt’s shares went into a trading halt on Thursday morning before the market opened, and are expected to remain in a halt until Monday to allow the maiden issue to happen.
United Malt is the world’s fourth-largest independent commercial maltster, with operations in Canada, the United States, Australia and the United Kingdom and strong market shares in these countries in the craft brewing and Scotch whisky sectors.
The company said interim revenue rose 9% $664.6 million, “due to solid demand for malt and brewing ingredients from brewing and distilling customers, with underlying earnings before interest tax depreciation and amortisation (EBITDA) of $77.9 million.
With the COVID crisis well upon us, UMG is looking for cost savings of approximately $10 million in the current second half period (including a 20% reduction in base fees for the Board and base salary for the executive leadership team for the remainder of FY20) and deferral of capital expenditure of approximately $5 million in the half.
“The first half results incorporate the impact of 3-4 weeks of venue closures related to COVID-19 restrictions which have been partially offset by increases in off-premise beer consumption. Overall demand in April was 30 percent lower albeit with a shift in demand between segments and the Warehouse and Distribution,” directors said yesterday.
Directors said the Board will evaluate payment of a final dividend for 2019-10 “taking into account current and future earnings and cash flows, available franking credits, and targeted credit metrics.”
There was no mention of the proposed tariffs from China, which suggests its a problem yet to hit home.
