Kernel-Trade, SunTrade Fined USD 11.9 mln each by Gov™t

According to Ukrainian News,the Antimonopoly Committee of Ukraine fined sunflower oil producers, Kernel-Trade, a subsidiary company of Kernel Holding S.A. (KER PW: N/R), and Suntrade, a subsidiary of Bunge, USD 11.9 mln each for unjustified price hikes in July-August 2007. Kernel-Trade and Suntrade raised the price of their sunflower oil over May-August 2007 by 39% and 40%, respectively. Antimonopoly Committee Chairman Oleksii Kostusev said that both companies abused their monopoly positions on the market; together they account for more than 50% of the domestic market for sunflower oil. Anna Dudchenko: Both companies responded by saying they would appeal the Antimonopoly Committee’s decision. We believe that the companies will be able to cancel or at least reduce the fine as their price increase seems to be in line with the average growth of domestic prices for sunflower seeds (+40% over May-August 2007). We believe the news may only have a minor effect on Kernel’s stock price at the moment as the company’s chances to avoid the fine or reduce it to a negligible amount look high. If, however, the fine is ultimately imposed in full (26% of Kernel’s USD 46.2 mln EBITDA of 2007), it risks putting downward pressure on the stock price.