Kernel revenues down 35% yoy in 3Q09

Kernel Group (KER PW) announced its 1Q10 (ending September 30, 2009) results yesterday on its website: revenues decreased 35.3% yoy to USD 240.3 mln, EBITDA by 31.4% yoy to USD 35.8 mln, operating profit (EBIT) by 32.2% yoy to USD 30.7 mln, while net profit increased 69% yoy to USD 39.2 mln. The company said it was maintaining FY2010 guidance: USD 1.05 bln in revenue, USD 185 mln in EBITDA and USD 130 mln in net profit. Kernel said that its 2009 harvest of wheat and coarse grain amounted to 45 mln mt according to its recent stats, vs. its initial estimate of 37 mln mt. Andriy Gostik: Although 1Q is not representative of expected full-year results, we think the news can exert downward pressure on the stock’s price. The company’s management explains a yoy worsening of Kernel’s results by the bear market for oil and grain, with average sale prices down 40% yoy. Yet, we see as realistic the company’s plans to improve its operating and financial results in the following three quarters by increasing bulk oil sales thanks, in particular, to a ramp up in production at its Poltava crushing plant. The latter’s capacity was raised 70% earlier in 2009. We stick to our full-year projections of sales at USD 1,099.4 mln and EBITDA of USD 186.9 mln.