United Malt Group (ASX:UMG) share price jumps on half-year results

The United Malt Group (ASX: UMG) share price is on the rise today after the release of the company’s half-year results. Here’s the lowdown.

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The United Malt Group Ltd (ASX: UMG) share price is on the rise today. At the time of writing, shares in the agribusiness are selling at $4.50 – up 1.81%. By comparison, the S&P/ASX 200 Index (ASX: XJO) is a massive 1.52% lower.

Today’s price increase comes after the company released its half-year results for the 6-months ending 31 March 2021.

Let’s take a closer look at today’s report.

Half-year update

In a release to the ASX, United Malt disclosed net profit after tax was down an astonishing 54% on the prior corresponding period (pcp) to $13.2 million. Revenue was 11% lower than the pcp at $589.6 million. Earnings before interest, taxes, depreciation, and amortisation (EBITDA) fell 32% on the pcp to $52.7 million.

Earnings per share (EPS) plunged 41% to 4.4 cents. The company will pay an interim dividend of 2 cents per share, unfranked. That’s down 49% from the final dividend paid in December last year. Net debt also increased to $344.1 million from $261.7 million on 30 September 2020

Despite the slide in profits, United Malt says today’s results are still higher than the earnings guidance released at its AGM. This is presumably why the United Malt share price is lifting today.

In another statement, the company attributed today’s lower numbers to the effects of COVID-19 lockdowns and the prior results being announced when it was not a standalone ASX-listed business. GrainCorp Ltd (ASX: GNC) spun off United Malt Group in March last year. In addition, it says its margins were also affected by an increasing Australian dollar and higher freight and shipping costs compared to the pcp.

Looking forward, United Malt says it expects sales volumes to still be below pre-COVID levels. The company attributes this to the high uncertainty that still exists in the northern hemisphere regarding the pandemic. 

Management commentary

Speaking on today’s results, United Malt Managing Director and CEO Mark Palmquist said the following:

Continued COVID-19-related lockdowns in our key markets of North America and the UK affected volumes and mix during the half from the ongoing effects of the reduction in on-premises alcohol consumption.

As we foreshadowed at the AGM, the lockdown impacts on volume and mix, together with the effects of the higher Australian dollar during the period and one-off costs affected the first half result.

While we are seeing emerging signs of reopening in some of our key markets, we remain prepared for the varying impact of the pandemic on customer demand, supply chains and our operations in the short term.

At the same time, we continue to implement our strategy to strengthen the business to capitalise on growth opportunities and sustainability priorities over the medium term.

He added that planned initiatives by the company should result in around $30 million of annualised benefits.

United Malt share price snapshot

Over the past 12 months, the United Malt share price has increased by around 11%. Over the last 3 months, however, it has increased by an even greater 21%.

Given its current valuation, United Malt has a market capitalisation of approximately $1.3 billion.

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Motley Fool contributor Marc Sidarous has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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