Australia: ABB Grain’s new malt house lifts company’s national malting capacity by about 20 per cent to 500,000 tonnes
Australia’s alarming poor harvest and soaring grain prices have proved ill-timed for ABB Grain, which has just brought on line a $46 million expansion of its barley malting operations, The Age unveiled October 03 (figures in AU$ unless stated).
The new malthouse in the Perth suburb of Forrestfield, rated one of the world's most advanced malthouses, will be officially opened on October 20.
But construction was completed three months ago and the facility is now operating at its new capacity of 200,000 tonnes a year of malt.
That is more than double its previous 90,000 tonnes, sucking in about 20,000 tonnes of barley a month, and lifting ABB Grain's national malting capacity by about 20 per cent to 500,000 tonnes.
Andrew Gee, chief operating officer of ABB Grain subsidiary Joe White Maltings said the fundamentals for the expansion of the export-focused plant remained sound because of projected long-term growth in demand in Asia for malt, a major ingredient in beer.
But this season was shaping as a "bloody disaster", with barley prices extremely high in anticipation of the below-average crop about to be harvested in Australia. Europe and Canada had also had smaller crops.
Mr Gee said he was paying above $270 a tonne for malting barley, a jump of a third on the $190 to $200 a tonne last year. While that was good news for farmers, it pushed the cost of producing the final product to about $330 a tonne.
And while the world price of malt had also risen on last season's depressed levels, it had not been enough to maintain margins as brewers resisted paying more.
"All the brewers think we are making lots of money out of it but we are not because our raw materials are so high," he said.
"Barley is very, very high priced this year because there is not a lot around. We will have sufficient stocks to run the place flat out but I'm buying barley this year for almost the price I sold malt last year.
"We will sell most of it, but we are certainly having fun with some of our customers, who are in a bit of denial at the moment. It's not the ideal season."
Mr Gee said brewers almost certainly would also look to put up the price of their product in the coming year to pass on some of the extra costs.
The expansion at Forrestfield is one of the biggest moves made by ABB Grain, Australia's biggest barley exporter, since its $1 billion merger two years ago with Ausbulk, SA's biggest grain storage company.
But the company has also been hit by the buoyancy elsewhere in the West Aautralia economy, with labour and material shortages increasing the cost of the expansion by more than 10 per cent from the original $40 million budget.
The malting operations were a dark spot on ABB Grain's last reported results for the half year to March 31.
Net profit rose 24 per cent to $44.8 million, but malting's contribution shrank from $8.1 million to $2.1 million pre-tax because of lower margins and slower sales amid a slump in the global malt market driven by big barley crops last year and overcapacity in Europe. ABB Grain shares closed down $0.3 at $6.68.
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