Bunge launches 790 kt sunflower seed crusher at Mykolayiv port

Agri-industrial multinational Bunge (BG US) launched on June 15 a sunflower seed crushing facility at the Mykolayiv sea port, the Interfax-Ukraine news agency reported the same day. The new plant has a nameplate crushing capacity of 2,400 tons of sunflower seed, which corresponds to annual capacity of around 790 kt. The plant can also process 1,700 tons of soya beans per day (about 560 kt p.a.). Implementation of the investment project, estimated by the company at USD 180 mln, enables the expansion of Bunge’s existing 3 mmt port transshipment capacities in Mykolayiv’s sea port by another 1.75 mmt of grain, oil and meal. 

Roman Topolyuk: Bunge’s new plant has already intensified competition among Ukrainian sunflower oil producers for seed this season as the company has been buying seeds to ensure high capacity loads. This is among the reasons why crushing margin in Ukraine’s sector has already decreased in the 2015-16 marketing year, which was also reflected in Kernel’s (KER PW) crushing margin. Kernel expects its crushing margin to come in at USD 100-115/t in FY2016 (ending June), compared to USD 187/t a year ago. We anticipate that this arrival of new crushing capacities will be offset by a higher harvest of sunflower in Ukraine in the autumn, which can potentially lead to a recovery in crushing margins, both sector-wide and Kernel’s. Indeed the harvested area under sunflower seed has already increased 14.5% yoy to 5.5 mln hectares in 2016, according to the Agrarian Policy Ministry of Ukraine. We reiterate our BUY recommendation for Kernel’s stock.