Operating nearly one and a half years as a standalone company, GrainCorp’s spin-off United Malt Group (UMG) faces strong headwinds.
UMG was foremost affected by the ongoing COVID-19 pandemic. Mark Palmquist, managing director UMG told the press this morning that the business is already recovering in North America and Europe from the consequences of the pandemic but currently struggles in Australia and Asia where vaccination rates are still low and the economy is partly in lockdown. “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,” Palmquist said.
Besides the direct disruption caused by the pandemic, the company also suffers from indirect disruptions, especially concerning payment defaults and exploding container and ocean freight rates.
Palmquist warned of AUD 20 million to AUD 22 million worth of impairments in this fiscal year, related to one 20-year customer with a USD 16 million bad debt on their tab. “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 reported.
Another impairment loss concerns missing inventory after the collapse of long-term grain storage contractor Alexander Inglis & Son in the UK earlier this year.
United Malt expects for the year to September 30 in its first year of independence underlying earnings in the range of AUD 129 million and AUD 134 million, down from the AUD156.1 million in 2019-20.