Stock in S&P/ASX 200 Index (ASX: XJO) maltster and takeover target United Malt Group Ltd (ASX: UMG) is defying the market's downturn despite the company scrapping its interim dividend.
Right now, shares in United Malt are trading 1.61% higher at $4.42 on the release of the company's first-half earnings.
Meanwhile, the ASX 200 is down 0.5%.
Stock in ASX 200 maltster soars despite binned dividend
Here are the key takeaways from United Malt's half-year results:
- Revenue lifted 16% to $756.6 million
- Earnings before interest, tax, depreciation, and amortisation (EBITDA) slumped 17% to $38.3 million
- Underlying EBITDA came in at $52.7 million – a 1% improvement
- Posted an after-tax loss of $13.8 million – down from the prior period's $6 million profit
- Basic earnings per share (EPS) came to a 4.6 cent loss
- Interim dividend scrapped
The company's costs climbed over the six months ended 31 March. It recorded $5.6 million of costs from closing out ineffective currency hedges and exchange rate movements, as well as $2 million of one-off restructuring costs, and $6.8 million of software-as-a-service (SaaS) costs.
Meanwhile, lower demand for beer saw its processing segment's sales disappoint in the first quarter. Though, higher barley prices and improved commercial terms saw the segment's revenue rise 23% to $612.7 million.
What else happened last half?
Of course, the big news from the company last half was the takeover bid posed by Mallteries Soufflet. The French maltster offered $5 per stock to acquire its ASX 200 peer.
United Malt granted the suitor due diligence in March. As foretold in a trading update last month, it realised $3 million of one-off costs associated with the $1.5 billion takeover bid.
Its net debt increased 41% last half to $639.2 million, bringing its net debt-to-EBITDA ratio to 9.8 times. The company has received covenant amendments from its banks to accommodate the temporarily higher ratio.
Meanwhile, its net finance costs more than tripled to $16.4 million on the back of rising interest rates, higher barley inventory costs, and the cost of barley required for its new Inverness facility. The Scottish facility officially kicked off production in late March.
What did management say?
Commenting on the news seemingly bolstering the ASX 200 stock today, United Malt managing director and CEO Mark Palmquist said:
While the first quarter of FY23 included a continuation of the challenges experienced in the prior year, our financial performance improved markedly during the second quarter.
As we indicated previously, our gross margins have also improved from the progressive implementation of enhanced pricing and commercial terms with our customers which came into effect from 1 January.
We expect this rate of financial improvement to continue into the second half as our contracts better reflect our improved commercial terms.
What's next?
Looking forward, United Malt expected its underlying EBITDA to come in at $140 million to $160 million this financial year.
The ASX 200 stock will return dividends as its earnings improve. It continues to aim to distribute around 60% of its underlying net profit after tax (NPAT) to investors.
Meanwhile, Malteries Soufflet is continuing its due diligence. United Malt will keep investors in the loop on the prospective takeover.
United Malt stock outperforms the ASX 200
The United Malt share price has rocketed 26% since the start of 2023, compared to the ASX 200's 4% lift.
The stock is also trading 11% higher than it was this time last year while the ASX 200 has risen just 1% in that time.
