United Malt Group says trading in North America and the UK has improved as overseas economies open up but the ASX firm will still make a $22 million provision in its full-year result as COVID-19 hurts consumption, contractors, and customers.
The $1.3 billion maltster this morning said the current high vaccination rates in the US and UK and northern hemisphere summer weather had supported improved activity in the second half of the year, with the company well-placed to leverage reopening of venues in the US and Canda for increased on-premise beer consumption.
The company also expects malt volumes for the full year to reach about 95 per cent of pre COVID-19 levels.
That said, United Malt’s Asian export customers have been more affected by stringent COVID-19 restrictions, including strict stay at home orders and curfews, which have reduced volume supplied from Australia and Canada.
United Malt expects to report earnings in the range of $103 million to $108 million for FY21, 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 FY20.
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 flagged $20 million to $22 million worth of impairments in the full-year ending on September 30, 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 was spun out of bulk grain handler Graincorp last year, and supplies malt and other brewing ingredients and products to global brewers, craft brewers and distillers.
Its shares were last trading at $4.40 and despite softening since June, were still up 7.3 per cent this year.
United Malt said it does not expect a recovery in export sales to the Asian region until freight disruptions fully dissipate and COVID-19 restrictions normalise through higher vaccinations rates across the region.
Read More: Markets Live, Thursday 2 September, 2021