The United Malt Group Ltd (ASX: UMG) share price is surging higher today following the release of its FY20 results. At the time of writing, shares in the group are up 4.35% higher to $4.80. Let's take a closer look at how United Malt performed over the past financial year.
What's driving the United Malt share price?
For the period ending 30 September, United Malt reported a 2% revenue decrease to $1.3 billion over the prior corresponding period. The company blamed COVID-19-related volume declines in the second-half of the year for the drop.
Underlying earnings before interest, tax, depreciation and amortisation (EBITDA) shed 19% to $156.1 million. Earnings were hit hard with a perfect storm of a drop in sales and a change in the product mix. In addition, corporate costs and insurance premiums rose as the business demerged from Graincorp Ltd (ASX: GNC) in March.
Underlying net profit after tax (NPAT) stood at $57.4 million, down 3% on the prior year.
Net debt reduced to $261.7 million compared with the $584.1 million reached at the end of March (H1 FY20). A recent $170.6 million equity raise was used to fund growth opportunities and repay debt.
United Malt said that it maintained a comfortable headroom within its repayment obligations. The group has no substantial near-term refinancing commitments with long-term debt facilities not maturing until November 2022.
The board declared a final dividend of 3.9 cents to be paid to shareholders on 30 December. This represents a pay-out ratio of 40% of underlying NPAT for the second-half. The company noted that its future dividend will seek to distribute roughly 60% of NPAT, subject to trading conditions.
Management commentary
Commenting on the results, United Malt managing director and CEO Mark Palmquist said:
Following a solid first half, our financial performance was impacted in the second half by COVID restrictions which adversely impacted on-premise alcohol consumption, particularly for small craft beer brands. While off-premise consumption increased, this was not sufficient to mitigate the decline in on-premise consumption.
We have implemented necessary changes to how we operate our production and warehouse facilities to align costs with demand, including staff redeployment, some curtailment of capacity and managing more frequent ordering patterns.
Mr Palmquist went on to say United Malt remained well positioned to manage through the current market uncertainty which was expected to continue throughout FY21.
We have entered into an in-principle agreement with our existing Mexican distribution partner for an expanded partnership to further grow United Malt's penetration into the Mexican market. The new agreement will provide on the ground access to the growing craft market in Mexico, enhanced customer experience, and more efficient logistics.
While some signs of recovery have emerged in 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, including further lock downs in the UK.
About the United Malt share price
The United Malt share price has gone on a mini-rally this month, up almost 15%. Although this can be attributed to positive market sentiment, shares a just a touch below its all-time high reached in April.
United Malt has a market capitalisation of $1.3 billion and a price-to-earnings (P/E) ratio of 16.6.
