At last some good news for shareholders in United Malt Group (UMG) – instead of downgrades and gloom about overseas crops and the impact of the Russian invasion of Ukraine they have been hearing about in recent months, the company yesterday revealed a more accommodating approach from its banks and is seeing a solid improvement in harvest conditions.
UMG said that its banks have relaxed the covenants on its loans for the September 30 and March 31 test periods (which restrict the size of its debt compared to its earnings before interest tax depreciation and amortisation – EBITDA) and the company has also been given additional inventory funding capacity to accommodate an expected increase in short-term requirements to fund more barely purchases.
UMG CEO Mark Palmquist said on Wednesday the agreement with the banks “reflects the strong relationship United Malt maintains with our lenders and their understanding of the short-term impact on our business of higher barley inventory costs and volume of barley required for the start-up of the Inverness facility in Scotland.”
“As we outlined at the Investor Day on 3 August 2022, based on our FY23 earnings outlook, the significant step down in capital spending commitments in FY23 and the continued support from our banks, we remain confident that United Malt will not need to raise additional capital.”
He said the Company will complete its customary annual renewal of its working capital facilities in November 2022 and “has no significant near-term refinancing requirements in relation to its long-term debt facilities which mature in November 2024.”
Looking at the outlook for the barley crops in its various regions, UMG said that in each of its sourcing regions, the crop situation remains positive.
“A significant improvement is expected in the volume and quality of the North American barley crop compared to last year,” it said.
“The Canadian and US barley crop harvest is progressing in line with United Malt’s expectations regarding supply and quality. The latest Canadian barley production outlook is projected to be 10.2 million tonnes, 47% higher than 2021.
“New season barley has already been received and malted in the Company’s North American facilities and is producing quality malt.
“England’s malting barley harvest has finished and Scotland’s is 80% completed, with both demonstrating good quality and yields.
“In Australia, rain across all major growing regions and moderate temperatures are creating favourable barley growing conditions. “
UMG shares rose 1.4% to $3.45 on a day when the ASX 200 slumped 1.4%, so not a bad performance.
