The United Malt Group Ltd (ASX: UMG) share price was the second-best performer in the S&P/ASX 200 Index (ASX: XJO) today.
United Malt shares hit a high of $3.75 today, up 5.6% amid investors reacting positively to news delivered at the annual general meeting (AGM).
The commercial maltster finished the session on Friday at $3.72, a gain of 4.79%.
The ASX 200 benchmark itself finished down 0.8% to 7,433.7 points.
So, what did the chair of United Malt Group tell shareholders today?
Dividends are back!
United Malt Group chair Graham Bradley AM told shareholders the company expected to recommence paying dividends in FY23.
The ASX 200 share did not pay a final dividend in FY22 due to the company's poor financial performance.
Bradley said:
Looking ahead, your Board expects a progressive recovery in earnings during FY23 and we expect
to resume dividend payments …While certain challenges remain, several of these headwinds are expected to abate as FY23 progresses.
FY22 net profit after tax (NPAT) came in at $11.6 million, which was 20% down on FY21.
The company blamed resurgent COVID-19 impacts, a severe drought affecting the Canadian barley crop, significant disruption to ocean and rail supply chains, and increased freight and energy costs.
United Malt paid an interim dividend of 1.5 cents per share in FY22. This was equivalent to 40% of the full-year underlying NPAT.
This is well short of the company's dividend payout ratio of approximately 60%.
What is United Malt doing to improve its financial performance?
Bradley said the company was progressing with several initiatives to streamline operations and rejig contracts after "a challenging year" in FY22.
United Malt is progressively re-negotiating prices and improving commercial terms with its largest customers.
Bradley explained that this "will reduce our risk exposure to barley supply, quality and prices and to additional energy costs and freight surcharges".
He said the new pricing terms had been coming into effect since 1 January.
The impact "will flow through to our results from the second, third and fourth quarters of FY23".
He added:
Our first half FY23 results (which we will report in May) will, therefore, reflect a half year when we combine two very different quarters and we will seek to highlight the improvement in the second quarter.
What's the outlook for this ASX 200 share?
Bradley said the company expected "a further step-up in earnings in FY24".
He said the North American crops were good, and the company did not expect to see the same supply or quality problems it experienced in FY22.
He said sea freight and container rates and availability were better, and gas prices were moderating.
The company confirmed earlier guidance of underlying earnings before interest, tax, depreciation, and amortisation (EBITDA) (before SaaS costs) of $140 million to $160 million.
This compares with an FY22 EBITDA (before SaaS costs) of $105.9 million, down 23% on FY21.
A potential headwind in FY23 is the possibility of reduced beer demand due to inflation and fears of a recession. Bradley said the company is "carefully monitoring" this aspect.
