UMG - United Malt Group

[System]

On 4 April 2019, GrainCorp announced its intention to demerge its international malting business, United Malt, subject to shareholder and other approvals. The proposed Demerger will result in two independent ASX-listed companies:

• United Malt, an international malting and craft brewing distribution business; and
• GrainCorp, an domestic and international grain handling, storage, trading and processing business focused on grains, oilseeds, pulses, edible oils and feeds.

United Malt is the fourth largest commercial maltster globally, with approximately 1.25Mtpa of capacity and more than 95% average utilisation across 13 processing plants in Canada, United States of America (US), Australia and the United Kingdom (UK). UMG also operates an international distribution business, which provides a full service offering for craft brewers and distillers, including malt, hops, yeast, adjuncts and related products.

UMG generates earnings along the malt supply chain, from barley procurement and handling, malt processing, and sale and distribution of value-added malt products. UMG benefits from having high quality, low operating cost processing assets that are strategically located in premium barley growing regions, allowing it to source high quality barley and access a diverse range of customers, including global brewers, craft brewers, distillers and food companies.

It is anticipated that UMG will list on the ASX during March 2020.

https://www.unitedmalt.com

 

[Dona Ferentes]

took a year for the demerger; UMG listed on 24 March 2020.

UMG is involved in the production, sale and distribution of bagged malt, hops, yeast, adjuncts and related products to major brewers, craft brewers, distillers and food companies.

In the top 20 are the usual suspects; fund managers and insto's. GrainCorp still holds 10%. Market cap now > $1bill..

Quite possibly managing to "unlock shareholder value" (do we wait for the takeover approach?)

As 4th largest malt company, it is essentially operating in English speaking countries Australia, USA, Canada and the UK. ...and the criteria for new markets
 Craft beer consumption growth rates;
 Ease of doing business;
 Established logistics infrastructure;
 Level of competition and brand establishment;
 Disposable income levels to support consumption of higher-priced craft beer; and
 Beer drinking culture

 

[wabullfrog]

Has been on a downward track since around the end of the first week of April where it reached a high of $5.24 & has now dropped below $4.

 

[The Triangle]

It's starting to get to where it needs to be! Want to see a reporting period where graincorp and umg both present separate financials. EV is sitting around 1.43 billion, EBITDA around 167 million. Gives ~ 8.6 ratio. Not expensive, but not cheap. However when you consider what is happening in the world at the moment. I think it's getting to be very expensive. Beer consumption drives this company. The vast majority of the beer I consume is out at bars, after work, and in social situations. This has effectively ceased for me - and likely the majority of Australians, Americans and Europeans. Yes, people are drinking at home, but not enough to offset the hospitality industry shutdown. UMG need to come out with a corona announcement to update the market. One of the few companies yet to do so.

I've started to see this demerger is a risky idea. Two smaller companies without the ability to leverage off each other to grow, acquire, and be shielded from bad market conditions. My prediction is that these guys will drop, then get swallowed up by another malter. In the end - GNC and UMG will probably be bought out for less than $9.

 

[Dona Ferentes]

It's starting to get to where it needs to be! Want to see a reporting period where graincorp and umg both present separate financials. EV is sitting around 1.43 billion, EBITDA around 167 million. Gives ~ 8.6 ratio. Not expensive, but not cheap. However when you consider what is happening in the world at the moment. I think it's getting to be very expensive. Beer consumption drives this company. The vast majority of the beer I consume is out at bars, after work, and in social situations. This has effectively ceased for me - and likely the majority of Australians, Americans and Europeans. Yes, people are drinking at home, but not enough to offset the hospitality industry shutdown. UMG need to come out with a corona announcement to update the market. One of the few companies yet to do so.

I agree. Saw somewhere, I think it was CUB, saying home-consumed beer - cans and bottles - is no way compensating for the loss of keg beer sales.

I've started to see this demerger is a risky idea. Two smaller companies without the ability to leverage off each other to grow, acquire, and be shielded from bad market conditions. My prediction is that these guys will drop, then get swallowed up by another malter. In the end - GNC and UMG will probably be bought out for less than $9

Probably the plan all along (until CV-19 came along)

 

[Dona Ferentes]

I agree. Saw somewhere, I think it was CUB, saying home-consumed beer - cans and bottles - is no way compensating for the loss of keg beer sales.

ah yes, that was the quote - I put it in TWE thread a few days ago

"People aren’t sitting at home drinking 10 times what they were before, which some of the anecdotes suggest. The reality is we [CUB] are half the market and beer sales have plummeted since March. When people are in isolation there are less drinking occasions happening among family and friends which results in underlying consumption being reduced".

Peter Filipovic, CEO, Carlton & United Breweries

 

[Dona Ferentes]

"China has fired its first shot in an increasingly bitter diplomatic row, threatening to slap major tariffs on Australia's barley exports, that could rip hundreds of millions of dollars from the trade."
https://www.abc.net.au/news/2020-05...nsion-barley-tariff/12232426?section=politics

https://www.graingrowers.com.au/update-on-china-anti-dumping-investigation/

 

[Banksy]

mmm... Beer

 

[Dona Ferentes]

Coopers Brewery has stated exports from its Adelaide malting plant have doubled in the past 12 months. The nation’s largest Australian-owned brewer is now sending about 35,000 tonnes of malt a year from its maltings, mainly to food producers and brewers in South Korea, Thailand and Singapore. Smaller quantities are also being sold to brewers and distillers across northern and Southeast Asia, the South Australian-based company said.

Coopers Maltings manager, Dr Doug Stewart, said demand for high-quality malt from overseas food producers had not been impacted by COVID-19.

“In March this year, we exported 3100 tonnes, compared with less than 1000 tonnes in March 2019,” Dr Stewart said.“In January we exported about 3700 tonnes, which is our best month for exports on record.”

Dr Stewart said sales to some overseas brewers had been patchy in recent weeks, but this had not had a significant impact on overall export quantities. “Because a good proportion of our exports are going into the food trade, we are not meaningfully impacted by any slowdown experienced by brewers,” he said.

Dr Stewart said exports of 35,000 tonnes a year represented more than half of the Coopers maltings capacity. Coopers uses about 15,000 tonnes a year in its beer production, DIY beer concentrates and malt extract production, with smaller volumes sold to other Australian brewers and food producers.

“One of our key selling points for overseas customers is the quality of the malt we produce, which is a result of high quality barley sourced from South Australian farmers and our state-of-the-art equipment,” he said. “However our plant is also flexible enough to allow us to produce single origin malts which are increasingly popular among Australian craft brewers and distillers."

Coopers is privately held; selling to the food trade and not to China would be 2 ticks. ... we can do OK in competitive markets as long as the quality is high.

 

[Dona Ferentes]

$140mill capital raising was launched on Thursday morning and priced at $3.80 a share, which represented an 11.4 per cent discount to United Malt's $4.29 last close.

To follow, $25mill SPP offer would open and a booklet would be dispatched on Thursday May 28.

 

[Garpal Gumnut]

$140mill capital raising was launched on Thursday morning and priced at $3.80 a share, which represented an 11.4 per cent discount to United Malt's $4.29 last close.

To follow, $25mill SPP offer would open and a booklet would be dispatched on Thursday May 28.

I reckon they will go cheaper down the track.

A wise move though.

gg

 

[Dona Ferentes]

quality will out?

Chinese brewing giants are leading the internal pushback against Beijing’s threats to slap tariffs on Australian barley exports, with companies including Tsingtao reliant on imported grain to produce beer and export malt across Asia.

With Australian barley considered superior to that of international competitors, Chinese brewers have been importing hundreds of thousands of tonnes of premium malting barley to produce beer in one of the biggest alcohol markets in the world. The Tsingtao Brewing Company uses about 200,000 tonnes of Australian grain every year, which it describes as “the best quality”. In Qingdao, home of the first brewery in China, Australian barley is regularly used.

At its peak in 2015, the Chinese market accounted for 78 per cent of Australia’s entire barley export market. Australian Export Grains Innovation Centre chief executive Richard Simonaitis said our barley was popular in Chinese malthouses and breweries as it was grown in a dry climate and allowed brewers to add more sugar than usual.

“China loves Australian barley because it is grown in a clean, dry climate. It’s very safe to use and it needs less cleaning than barley from wet countries, which can carry moulds and other contaminants into the malthouse,” he said. “What’s also great from a Chinese perspective is the quality of the protein, which helps multiply the yeast rapidly, allowing for a rapid fermentation. Chinese beer uses very low levels of malt and uses more sugar or rice syrup; Australian barley allows for efficient conversion of these adjuncts into alcohol in the brewing process.’’

Grain Producers Australia chief executive Andrew Weidemann said the industry had a 40-year history with Chinese brewers and it would hurt the communist nation’s ability to export products across Asia.

“The quality of Australian barley has led to a lot of work being done there,’’ he said. “We have university investment in terms of training in China. It’s going to have a major impact for Chinese partners. What are they going to do for the importation of malt?”

Reports on Tuesday said the China Alcoholic Drinks Association had made a submission to the 18-month anti-dumping barley investigation being run by China’s commerce ministry.

“This would hurt the interests of the beer industry. This might also push up corn prices and increase trade uncertainty,” the group said in its submission.

https://www.theaustralian.com.au/na...s/news-story/cf777d648b2a9342ff10a45b40e8ff4a

 

[JTLP]

I’d be filthy if I’d bought shred post demerger and then they slap a cap raising on. Wouldn’t this have been flagged in the pro forma docs?

 

[Dona Ferentes]

Beer's flowing again. Never been a better time, they say. (NSW at least; restrictions apply)

UMG seems to have managed the Cap raising fairly well. The twin bogeys of Covid and China may have ruffled it, but not too seriously. A "preemptive strengthening of the balance sheet" at $3.80 a share ....and the SPP is still open for a while.

 

[Miner]

Has been on a downward track since around the end of the first week of April where it reached a high of $5.24 & has now dropped below $4.

https://www.asx.com.au/asx/share-price-research/company/UMG SP $5 about on Friday 5th June

 

[Dona Ferentes]

UMG seems to have weathered the IPO and Covid downturn well - achieved what they set out to do.

United Malt Group Limited FY20 Results
• Solid operational performance despite significant impact of COVID in 2H
• Revenue down 2% to $1.3b on volume decline in 2H
• Underlying EBITDA down 11% to $156.1m reflecting volume declines, negative product mix and increased costs as separately listed ASX entity • Robust financial position with net debt of $261.7m and gearing (Net debt/Underlying EBITDA) 1.7 times
• Final dividend of 3.9 cents, payable on 30 December 2020
• Well positioned to manage through current market uncertainty - current volumes at ~90% of pre-COVID levels

the FY results may have been brought on a flurry of short-lived enthusiasm

• While signs of recovery have emerged in some of our markets, we remain prepared for the evolving impact of COVID, and the potential for second and third waves, which could continue to disrupt demand, supply chains and operations

 

[Dona Ferentes]

One market participant sees UMG as a potential target for Corporate activity

United Malt is one of the largest malting companies in the world and is the only listed player in the industry. United Malt is a relatively new listing to the ASX having been demerged from Graincorp. United Malt was demerged in early 2020 partly in reponse to several buyout proposals that Graincorp had received for the company.

The company owns and operates 12 processing plants and a network of 21 distribution warehouses across North America, the United Kingdom, and Australia. These malting plants are strategically located close to barley-producing geographies and to brew houses or distillers that require a steady supply of malt to manufacture beer and whiskey. United Malt also services the fast-growing US and Australian craft beer markets, supplying a range of malts along with other products and services. Scotch whiskey production is also growing on the back of strong demand for pure malt whiskeys.

United Malt’s earnings were affected by the lockdowns implemented over the last 12 months, with on-premises consumption hitting the firm’s craft beer customers particularly hard. As lockdown restrictions are easing in most parts of the world, on-premises volumes are returning to more normal levels as demand for beer particularly from craft brewers increases and this is generating an improved outlook in demand for malt.

The longer-term outlook for craft beer remains positive as consumers switch to the fuller flavours of craft brews, which should underpin demand growth in United Malt’s brew services division. The company is also in the middle of a transformation program expected to deliver A$30 million in savings over the next three years through improved warehouse utilisation, production enhancements to processing plants and route optimisation.

Given these forthcoming improvements and given previous corporate interest in the company, it would not be surprising if United Malt attracted takeover interest, given the entrenched market position of each of the firm’s plants, the company’s fairly predictable cashflows, and the growth opportunity offered by craft brewery and whiskey distilling. Similar companies have traded at higher multiples in the private market than United Malt currently trades on. With interest rates so low, the predictable cashflows United Malt produces would be attractive to a cashed-up acquirer. Further, we believe United Malt may be attractive to private equity players on the basis that each region could be sold separately to an in-market operator which could extract significant synergies when acquiring United Malt.

- Anton Tagliaferro at IML

 

[Dona Ferentes]

drop of 10% on the Update

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 .

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 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

 

[Miner]

Out

drop of 10% on the Update

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.


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.


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

Outside the box, by any chance has a connection with United Breweries (UB) group's infamous Vijay Mallya ?
Use Google automated translation to read the news please.

CASTLE MALTING®: CASTLE MALTING NEWS in partnership with E-Malt

Castle Malting - Slady vysoké kvality pro vysoce kvalitnà pivo. SladaÅská spoleÄnost se nacházà v mÄsteÄku Beloeil, v Belgii.

www.castlemalting.com

CASTLE MALTING®: Neues von Castle Malting in Zusammenarbeit mit e-malt.com

Castle Malting - Qualitätsbier mit hochwertigem Malz! Die Mälzerei befindet sich in Beloeil, Belgien.

www.castlemalting.com

 

[Dona Ferentes]

any rally nipped in the bud, down 5%

UMG expects underlying EBITDA (before SaaS costs) for the first half to be around $57 million. FY22 underlying EBITDA (before SaaS costs) is expected to be in the range of $115 to 140 million.

The FY22 guidance includes $20 to 25 million of costs resulting from the severe drought conditions in Canada of which $8 million has been incurred in the first half.

United Malt said that supply chain disruption in sea, rail and road freight has delayed shipments to some customers and associated revenue recognition in the first half. The company expects the FY22 EBITDA impact of delayed sales from supply chain disruption to be approximately $8 million.

The company is also incurring higher input costs, including energy and inbound and outbound freight costs. These increased input costs are expected to result in a net EBITDA impact of approximately $4 million in FY22.

"We have seen a further impact of these external factors since February, particularly the deterioration in the quality of the Canadian barley crop. We are addressing this issue for our customers through our ability to source barley by leveraging our international operations in key barley growing regions.

"These recent cost escalations will be largely passed through to customers over the course of the next 9 months, reducing the impact into FY23.