United Malt Group, GrainCorp’s former malting division which has started as a standalone business in March (inside.beer, 22.3.2020), has taken "pre-emptive action to strengthen the balance sheet and increase resilience in the current uncertain environment".
The international malting group, which operates 13 maltings with a total annual capacity of 1.25 million tons of malt in USA, Canada, Australia and Great Britain, completed last week an AUD 140 million (USD 90m) share placement with institutional investors. Additionally, the company hopes to raise another AUD 25 million (USD 16m) by offering its existing shareholders up to AUD 30,000 (USD 19,338) each on new stock which will be dispatched on May 28.
The funds were raised at AUD 3.80 (USD 2.45) per share, which represented an 11.4 percent discount to its last traded price. As expected, this move put pressure on United Malt Group’s share price which is now trading below the IPO price from March.
Further actions to strengthen the balance sheet are a 20 percent pay cut for the current trading year and deferred investments of about AUD 5 million (USD 3.22m). The company targets cost savings of about AUD 10m (USD 6.44m) in the second half of its trading year 2019-20. However, construction on BairdsMalt's a GBP 51 million (USD 96.7m) expansion of its Arbroath malting plant in Scotland which had stopped after the UK government halted all non-essential construction as part of its COVID-19 response, is still expected to be completed by the end of calendar 2021.
Managing director Mark Palmquist informed that revenue from major brewers which make up 53 percent of the company's revenue, was affected by the crisis only to a minor extend, while sales to craft brewers and Scottish whisky distillers, which account for the rest of the business had been impacted.
Craft brewers servicing the on-premise market are especially hard hit by COVID-19 stay-at-home restrictions, while packaged beer sales for take home consumption had actually increased, according to Mr. Palmquist.
"We anticipate that consumers may remain cautious on returning to public venues which may continue to impact on-premise sales. Subject to the decisions of each government to ease restrictions in each of our markets, we expect a slow return to pre-COVID-19 volumes," Palmquist said.
