GrainCorp outlines demerger plans ahead of April UMG listing

Grain Central, February 7, 2020

Mark Palmquist will switch his managing director and CEO role from GrainCorp to United Malt Group with the planned demerger. Photo: GrainCorp

THE SPLITTING of GrainCorp into two ASX-listed companies appears to be fast approaching, with GrainCorp yesterday outlining details of its proposed demerger in a presentation to investors.

It will divide the company’s assets and operations into two camps, GrainCorp, which will retain the company’s grain accumulation, handling and trading functions and assets, and United Malt Group (UMG), which will stand alone as the world’s fourth-largest commercial maltster.

Subject to legal approval, UMG shares are expected to commence trading on the ASX on 2 April.

GrainCorp has said the demerger will enable and accelerate a number of simplification and cost-reduction initiatives to continue, and deliver cost savings of about $20 million per annum once the company splits.

“After the demerger, there will remain the potential for GrainCorp, United Malt or other GrainCorp portfolio businesses to be sold to a third party, potentially delivery a control premium to GrainCorp shareholders and/or UMG shareholders,” the company said in its presentation.

About UMG

UMG’s key brands and operations will be centred on the 13 facilities in total it owns through Bairds Malt United Kingdom, Barrett Burston, Canada Malting Co. Limited, and Great Western Malt.

Its malting plants have a total annual global capacity of around 1.25 million tonnes (Mt) , with around 20 per cent of it held through its three Barrett Burston malthouses in Australia, a further 20pc with Bairds in the UK, and the balance in North America.

Yesterday’s presentation named the UMG senior management team under chairman Graham Bradley and managing director and chief executive officer Mark Palmquist as:

  • Amy Spanik as chief financial officer, leading on from her CFO role at GrainCorp Malt;
  • Darren Smith as president, processing, following on from his role taken up last year with GrainCorp Malt;
  • Former president of Country Malt Group and Brewcraft USA Bryan Bechard as president, warehouse and distribution;

On the home front

GrainCorp is eastern Australia’s biggest bulk handler, where its assets include 145 country receival sites which can store up to 20Mt in total, and seven bulk import/export port facilities with a combined bulk export capacity of 15Mt per annum.

Drought-reduced receival volumes and now-expired take-or-pay rail contracts were among the factors which have just about halved GrainCorp earnings in the past two financial years from the $127 million recorded in 2016-17.

The Crop Production Contract (CPC) is expected to address this exposure to low-volume years in eastern Australia by underwriting the business’ cash flows and profitability.

With counterparty White Rock Insurance (SAC) Ltd, GrainCorp will receive payments of up to $80M when eastern Australia produces less than 15.3Mt of grain, and will make payments of up to $70M when more than 19.3Mt is produced.

Production payments are capped at an aggregate net limit on received or issued payments of $270M over the CPC’s 10-year term, with the premium expected to be less than $10M annually.

International plans

GrainCorp’s marketing offices are located in Australia, Canada, China, Germany, India, Singapore, the UK and Ukraine.

Yesterday’s presentation outlined plans to augment GrainCorp’s origination clout in the Black Sea on coarse grains for the human and stockfeed markets, in Canada, and in the organic markets in the UK and North America.

Priority destination markets have been identified as:

  • Asia, with a focus on relationships with end-market customers looking to supply growing stockfeed demand;
  • Europe, where sustainable non-GM canola, organic grains and proteins are being sought;
  • India as a major consumer of pulses from Australia and Canada;
  • North America on organic grains and oilseeds.

Its GrainsConnect Canada joint-venture with Zen-noh gives GrainCorp a presence in Canada, and it owns five bulk liquid storage terminals in New Zealand and one in Shanghai.

Leaders and assets

Its bulk terminals handle products including aggregate, cement, liquid agri-products, protein meals, sand, sugar, and woodchips as well as grains, oilseeds and pulses.

It also owns a bulk liquid-storage terminal at Port Kembla, four liquid feeds distribution centres, and six used cooking-oil collection, recycling and distribution centres.

In Australia, GrainCorp owns oilseed-crushing plants in Numurkah and Pinjarra and refining facilities in Footscray and Numurkah.

GrainCorp’s senior management team under chairman Peter Richard and managing director and CEO Robert Spurway, all continuing in their current GrainCorp roles, will be:

  • Alistair Bell as chief financial officer;
  • Klaus Pamminger as chief operating officer;
  • Cate Hathaway as chief people and transformation officer;
  • Stephanie Belton as group general counsel and company secretary.

Source: GrainCorp



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