United Malt Group (UMG) says its trading in the huge North America and the UK markets has improved as those economies open up but it will still make a $22 million provision in its full-year result to cover the impact of Covid Delta on consumption, contractors, and customers.
UMG told the ASX on Thursday that the current high vaccination rates in the US and UK along with the hot northern hemisphere summer had supported improved activity in the second half of the year, leaving it company well-placed to leverage reopening of venues across North America for increased on-premise beer consumption.
As a result of that and other improvements, it expects malt volumes for the full year to reach about 95% of pre COVID-19 levels.
However, the news is not so good from United Malt’s Asian export customers who have been more affected by stringent Covid Delta driven lockdowns and other restrictions, including strict stay at home orders and curfews.
That has reduced barley and hopes volumes supplied from Australia and Canada.
United Malt expects to report earnings in the range of $103 million to $108 million for the year to September 30, and a statutory profit of between $15 million to $18 million.
Underlying earnings will be between $129 million and $134 million, down from the $156.1 million in 2019-20 (its first year of independence after being spun out of GrainCorp).
The company said its performance in Asia had been further compounded by continuing ocean freight disruption and freight cost increases across the shipping market.
“In Australia, the extended COVID-19 lockdowns have affected on-premise demand, together with lower export volumes to key Asian markets impacted by COVID-19,” United Malt told investors this morning.
The company also warned of $20 million to $22 million worth of impairments in the September 30 year, related to inventory held at grain storage contractor in administration the in UK and provision for bad debt related to the impact of COVID-19 on one long-standing Asian customer.
“Although discussions remain ongoing with this customer regarding potential receivable recovery, United Malt currently expects to record a bad debt provision in its FY21 accounts,” the company said.
United Malt supplies malt and other brewing ingredients and products to global brewers, craft brewers and distillers.
United Malt said it does not expect a recovery in export sales to the Asian region until freight disruptions fully ease and Covid Delta restrictions normalise through higher vaccinations rates across the region – that could be quite a while.
Investors didn’t much like any of that news and sent the shares down more than 6% to $4.13, the lowest they have been since late April.
