United Malt calls for vaccines to get people out and about as lockdowns wipe 30% off profit

The supplier to brewers says while signs of recovery are emerging, the pandemic is set to cause uncertainty throughout this year.

United Malt chief executive Mark Palmquist says COVID-19 vaccination rates need to hit about 70 per cent before the world fully opens up again.

United Malt chief executive Mark Palmquist has called for Australians and people elsewhere across the globe to be vaccinated against COVID-19 to help catapult the world back to some kind of normality and get beer fully flowing at rock concerts, sport events and other mass gatherings again.

Mr Palmquist’s comments came after a second wave of lockdowns across North America and the UK wiped 30 per cent of United Malt’s net profit as demand for its ingredients plummeted as drinkers were forced to stay away from pubs and clubs.

While other corporate leaders, such as Virgin’s Jayne Hrdlicka and Flight Centre’s Graham Turner, have called for the Morrison government to quickly open Australia’s borders — despite the fact that “some people may die” – Mr Palmquist said improving vaccination rates was the key to returning business to pre-COVID levels.

“It‘s really dependent on the vaccination rates. So everything that can be done to make the vaccinations available and getting the rates up I think what it’s ultimately going to take,” Mr Palmquist said, adding that positive signs were emerging.

“I look at the US and roughly half the population has had at least one dose, about a third of the population had two doses, so we‘re on our way.

“But... it‘s going to take a lot to get things open because I do think it’s going to have to take a vaccination rate that’s approaching 70 per cent before we see opening up.”

In Australia, the federal government’s hope of vaccinating the bulk of the population by the end of the year is being threatened by large numbers of people aged between 50 and 70 years old who are choosing to delay vaccination in the hope they can receive a Pfizer or Moderna shot rather than the with AstraZeneca jab, which has been linked to blood clots.

But epidemiology experts are warning Australians not to become complacent, highlighting the COVID-19 relapse in Taiwan - which had previously been able to stamp out community transmission of the virus for more than 200 days.

Lockdowns in the US and UK have knocked the froth off United Malt’s profits.

“We‘re seeing the impact of higher vaccination rate in the US and where we are seeing infection rates coming down and most importantly we’re seeing fatality rates drop considerably and hospitalisation rates dropping considerably,” Mr Palmquist said.

“So it‘s sure appears like a pathway that if we’re going to have to live with COVID then vaccination rates just need to keep going up.”

United Malt, which recently split from GrainCorp, recorded net profit of $13.2m in the six months to March 31, down from $18.8m in the previous corresponding period. Revenue, meanwhile, sank 11 per cent to $590m.

Still, it managed to deliver a slightly better result than forecast at its annual meeting, recording earnings before interest, tax, depreciation and amortisation of $52.7m compared with guidance of $47-50m.

Investors took comfort in the result, with United Malt’s shares rising 1.6 per cent to $4.49 versus a 1.9 per cent drop across the broader share market.

UBS analyst Apoorv Sehgal said it was an “incrementally positive result and outlook commentary”.

“(There was) no guidance, but tone of optimism in outlook commentary i.e. improving COVID-19 situation, pent-up beer demand, on-premise reopening. That said, 2H21E volumes to remain below pre-COVID levels, since March tracking at circa 95 per cent”.

Mr Palmquist said that the pandemic was set to continue to create uncertainty around earnings throughout this year, with the company giving no firm guidance in its half-year accounts.

Despite this, United Malt is forging ahead with upgrading and expanding its malting capacity, injecting £51m ($93m) pounds in Bairds’ Scottish malting facilities, which will lift its capacity by 79,000 tonnes to 300,000 tonnes a year across its Arbroath and Inverness sites.

Mr Palmquist said it was part of the company positioning itself to cater for a rise in demand as restrictions ease.

“One thing we are seeing is that the robust demand does come back whatever the relaxation is and restrictions. That‘s the point of optimism for us is that if we can keep on the pathway we’re going

“We‘re hopeful that trend of consumption will keep going up because it’s the on premise side, they got obviously hit the worst with all the restrictions. As that’s coming off, we’re seeing good robust demand coming out of consumers.”

In Australia, United Malt’s $27m replacement of its kiln in Perth is scheduled to be completed in October this year, with Mr Palmquist saying it will improve safety and lower emissions once commissioned.

United Malt will pay an interim dividend of 2c a share, unfranked, on June 18.