United Malt share price plunges 13% on earnings downgrade


The United Malt Group Ltd (ASX: UMG) share price is tumbling after the company downgraded its earnings guidance for the year ending 30 September 2022 (FY22).

It now expects to post around $100 million to $108 million of underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) before software-as-a-service (SaaS) costs. That marks a 22% drop on the top end of its previous guidance.

At the time of writing, the United Malt share price is $3.18, 13.35% lower than its previous close.

Let’s take a closer look at the latest from the S&P/ASX 200 Index (ASX: XJO) commercial maltster.

United Malt share price falls on earnings downgrade

The United Malt share price is suffering on Monday following the company’s latest trading update.

Despite an expected improvement, the company’s processing segment continued to be hit with the deterioration of the North American barley crop, supply chain issues, and high energy costs in the June quarter.

The segment’s underlying EBITDA (before SaaS costs) for FY22 is now expected to be between $62 million and $66 million.

There’s better news about the company’s warehouse and distribution segment. Its underlying EBITDA guidance remains at $46 million to $50 million.

The segment is benefiting from the reopening of major markets and renewed demand for craft brewing, as well as business optimisation initiatives.

Meanwhile, the company’s corporate costs guidance has been dropped to $8 million.

It also noted its debt to EBITDA ratio will exceed its targeted range of 2 to 2.5 times in FY22. Though, it doesn’t expect to have to raise capital to reach its targeted range in FY23.

Speaking of the company’s FY23, it anticipates a “material increase” in earnings for the period.

Its underlying EBITDA (before SaaS costs) for FY23 is expected to be between approximately $140 million and $160 million.

The improvement is expected to be driven by better North American barley crops and improved pricing and commercial terms. The competition of the company’s Scottish expansion project and the implementation of its technology platform will also play a part.

What did management say?

United Malt chair Graham Bradley commented on the news dragging on the company’s share price today, saying:

The board is disappointed with the company’s current year performance and outlook. While external conditions have deteriorated dramatically during FY22 … the pace of change in the business needs a material reset to ensure we meet the expectations of our customers and of our shareholders.

Higher energy prices and supply chain issues are likely to remain challenging for the foreseeable future as will the impacts of climate … We are building a more resilient global malting business to better navigate these challenges.

Source: Read More

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