Kernel crushing volumes slid 2% qoq in 4QFY18, in line with FY18 guidance

Ukraine’s largest sunflower oil producer and grain
trader Kernel (KER PW, KERPW) worsened its sunflower seed crushing volumes by
1.8% qoq (down 8.3% yoy) to 834.0 kt in 4QFY18, according to an operation
update published on July 17. Bulk oil sales increased 53.0% qoq (and rose 37.3%
yoy) to 386.6 kt in 4QFY18. Grain sales increased 44.6% qoq (or 64.3% yoy
increase) to 1.57 mmt in 4QFY18. Export terminals’ throughput rose 6.4% qoq (or
12.6% yoy increase) to 1.61 mmt in 4QFY18.

Meanwhile, FY2018 crushing volumes rose 6.0% yoy to
3.14 mmt, a record for the company’s history. It resulted in bulk oil sales
increasing by 20.1% yoy to 1.30 mmt in FY2018.

Andriy Perederey: The company’s crushing volumes are almost in line with its initial
guidance of 3.2 mmt, implying that its daily average crushing volumes rose 6.0%
yoy due to stronger results in 1QFY18, with the highest first-quarter crushing
volumes reaching 5.9 kt/day or 93.7% higher yoy. On the other hand, the record
sales of bulk oil was driven by shifting the sales volume from 4QFY17 to 1QFY18
(bulk oil sales increased 2.3x in 1QFY18) in FY2018. Based on the company’s
operational update, we estimate Kernel’s 4QFY18 EBITDA from sunflower oil sold
in bulk will be about USD 44/t, so we expect FY2018 EBITDA from sunflower oil
sold in bulk will be about USD 65 mln, or a 21.9% decline yoy. FY2018 EBITDA
will be in the range of USD 260-270 mln, down 15-20% yoy.