Beer drinkers are returning to pubs and United Malt's global sales revenues are bubbling back to pre-pandemic levels, but six months of heady barley costs and freight disruption have siphoned off some of the big malster's profit hopes.
In a week when other big Australian agribusinesses have posted profit leaps, United Malt Group reported a 24 per cent drop in half-year net profit after tax of $10.3 million.
Although group revenue for the six months to March 31 grew from almost $590m to $651.6m, its underlying earnings before interest, tax depreciation and amortisation dropped 5pc to $57m, largely because drought in Canada added to processing and logistics costs.
Its interim dividend has also taken a hit, down from two cents a share a year ago to 1.5c (unfranked), to be paid to shareholders on June 17.
The Australian-based global barley processor and craft brewing ingredients supplier operates about 1.25m tonnes of annual malting capacity at 12 processing plants in Canada, Britain, the US and locally under the 110-year old Barrett Burston name in Victoria, Western Australia and Queensland.
Its international full service distribution offering for craft brewers and distillers stretches from New Zealand to Europe and North America.
Revenue revived
Processing segment revenue actually grew 10pc to $498m, reflecting reviving sales in each of United's global markets as beer and spirit sales in bars, pubs and restaurants gained fresh momentum.
However, underlying EBITDA in the sector slipped 12pc to $41m as the dried out Canadian barley crop delivered lower quality and reduced yields which subsequently increased production costs and forced United's Canadian malt houses to pay extra costs to import barley.
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The combined impact of more barley required to address reduced quality and yields, and the additional logistics expenses for importing barley cost $8m.
Earnings were also eroded by disruption in sea, rail and road freight which delayed shipments to some customers, while higher energy and inbound and outbound freight costs caused a further $3m blowout for the period.
Solid position
However, managing director Mark Palmquist said United Malt remained in a solid financial position.
Although the external Canadian challenges had hurt short term results, he expected a "meaningful recovery in earnings as a more typical barley crop returns and as we price customer contracts to pass on the impacts of higher input costs over the coming nine months".
United's warehouse and distribution segment, where customer cycles are shorter and additional costs can be passed through more quickly, the company was achieving good earnings momentum.
"Longer term, we remain very confident about the positive fundamentals of the industry," Mr Palmquist said.
"Beer remains a significant and growing beverage category while demand for craft beer and ancillary products continues to accelerate.
"Demand for distilling continues to grow with United Malt's customers laying down spirits for 10-plus years for aged whisky.
"We continue to put the necessary building blocks in place to take full advantage of these positive market fundamentals."
United Malt has set the foundations for a structural increase in earnings from 2022-23
- Mark Palmquist, United Malt
In Britain the focus was on servicing the Scottish whisky market which requires quality malt to meet the long-term requirements of distillers to produce aged whisky.
A new malt plant in Inverness would add 57,000 tonnes of capacity for the distilling market at the end of this year, a significant proportion of which was already underpinned with customer contracts and.
At the same time a specialty ingredient processing plant was being built in Canada at Calgary to service growing demand for new products in craft beer and food applications.
"United Malt has set the foundations for a structural increase in earnings from 2022-23," he said.
"The expansion in Scotland will deliver additional capacity and the realisation of transformation benefits, together with the initiatives we are implementing to strengthen our business competitiveness of our business, we anticipate a meaningful increase in underlying EBITDA".
United confirmed its previous earnings guidance for the full year, tipping underlying EBITDA in the range of $115m to 40m.
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