Australian-based United Malt Group is recruiting new senior management and appointing an extra North American board director after conceding its global financial performance will fall well below expectations this year.
"The pace of change in the business needs a material reset to ensure we meet expectations of our customers and shareholders," said chairman Graham Bradley.
Soaring energy costs, international freight setbacks and the high cost and poor quality of last year's drought-withered US and Canadian barley crops have continued battering the world's fourth biggest malting business.
United Malt expects underlying earnings before interest, tax, depreciation and amortisation to fall to between $100 million and $108m for the trading year to September 30 - down from earlier forecasts of as much as $140m.
High barley costs and the extra grain volumes needed to supply its expanding processing operations in Britain had also blown out net debt-to-EBITDA beyond its 2.5 times target, but after talks with its banks, United did not believe it would need to raise extra capital to cover costs.
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The company is much more upbeat about the year ahead, particularly the much improved Canadian barley crop's prospects, where production is tipped to be almost 50 per cent up on last season when harvest begins this month.
It is forecasting a return to underlying EBITDA in the $140m to $160m range.
However, the beer and whisky ingredients business' sobering assessment of its current position sent United Malt's share price tumbling 17pc, or 60 cents, to about $3 in early week trading - an all time low since UMG listed independently in early 2020 and almost hit $5 a share.
The slump represented the worst performance of any company on the Australian Securities Exchange on Monday, while conversely, farm services business, Elders, rated as one of the best stocks on the board with a 4.2pc share price rise to $11.75.
Back in May the former GrainCorp subsidiary reported how its North American malting segment was being hurt by external events, including the significant deterioration of the barley crop's quality and size, requiring local grain to be supplemented with imports from Europe and Australia.
United Malt has 12 processing plants in Australia (Barret Burston), the US (Great Western Malting), Canada (Canada Malt and Britain (Baird's Malt).
Extra costs continue
Managing director, Mark Palmquist, said North American processing operations had continued feeling negative effects from the crop's extra costs, and higher energy usage and prices.
An anticipated improvement in sea, rail and road freight movements had not materialised either, causing ongoing delays to supply chain deliveries to customers.
Mr Palmquist expected the first quarter of the 2022-23 year to continue to be disrupted by the past year's pricing issues, but a return to an average North American season would be "a positive".
"Having the quality and quantity of barley we need in North America means the significant costs associated with importing barley incurred in 2021-22, which were not able to be fully passed through to customers, will not recur in 2022-23," he said.
"Better customer contract management and barley procurement will substantially improve results from January ... and the run rate will be significantly higher than our results in 2021-22."
The company had made notable changes to its commercial terms with brewers to better capture the true cost of servicing customers, including accounting for crop quality, barley price and inflation.
In Scotland, where it has been building two new malting plants, United has started producing malt at Arbroath at the rate of 22,000 tonnes a year and expected its Inverness site to be operating to deliver almost 80,000t annually by early 2023.
"The combined facilities are confidently expected to deliver an incremental EBITDA of about $18m on a full year basis," Mr Palmquist said.
Resetting the business
Chairman, Mr Bradley said resetting United Malt's performance and building a business more resilient to ongoing high energy prices, supply chain issues and the impact of climate on the business would "take time".
However, it was already benefiting from stronger financial disciplines put in place by interim chief financial officer, Ryan Dutcher, and a chief commercial officer would be hired to take responsibility for sales and marketing operations, including margin management.
"We will soon announce the appointment of a new North American based non-executive director with significant industry experience as part of ongoing board renewal," he said.
Meanwhile, the company's warehouse and distribution segment, which includes beer ingredient supplies to home brewers and the commercial craft brewing market, continues to benefit from the reopening of major markets and reviving craft brew demand.
The northern hemisphere drought has also left limited global malt stocks, with customer utilisation rates running at unusually high levels.
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