Kernel crushing volume drops 2% yoy in 2QFY22

Ukraine’s leading farmer and seed oil producer Kernel
(KER PW, KERPW) reported a 2% yoy drop in oilseeds crushing volumes in 2QFY22
(October-December 2021) to 985.5 kt, according to its Jan. 21 operating update.

The company’s edible oil sales slid 6% yoy to 398.7 kt
in 2QFY22. Kernel’s export terminals throughput rose 25% yoy to 2.98 mmt and
grain export from Ukraine jumped 45% yoy to 3.48 mmt. The company’s volumes of
silo intake advanced 28% yoy to 3.05 mmt in 2QFY22.

In 1HFY22 (July-December 2021) Kernel’s oilseed
crushing volumes dropped 12% yoy to 1.47 mmt and its edible oil sales decreased
14% yoy to 0.62 mmt. Kernel’s inland silos received 4.07 mmt of grains and
oilseeds, 12% more yoy, reflecting the larger crop size achieved by Kernel’s
farming segment in the current season. Its export terminal throughput added 22%
yoy to 5.19 mmt in 1HFY22. The company’s grain exports from Ukraine jumped 26%
yoy to 5.71 mmt in 1HFY22.

Kernel’s farming results in the current season are
encouraging, as the corn FY22 yield (expected) rose 16.6% yoy to 9.3 t/ha,
higher than the 6.5% yoy growth the company reported a quarter ago. Its FY22
yields for sunflower (0.9% more yoy to 3.0 t/ha) and wheat (25.9% more yoy to
6.1 t/ha) were in line with the values in its 1QFY22 report.

The company also provided no information about its
commissioning of  the Starokostiantyniv crushing plant which should have
added 1.0 mmt to Kernel’s total annual oilseed crushing capacity (from 3.71 mmt
as of June 2021).

Dmytro Khoroshun: With weaker
crushing results in 1HFY22, the company’s plan to increase crushing volumes to
3.8 mmt in the full year, expressed in 1Q report, looks no longer achievable.
We estimate the company will crush around 3.5 mmt of oilseeds this financial
year (up 10% yoy).

Nevertheless, we continue to expect that the
oilseed segment, along with infrastructure, will be a key driver for the
company’s P&L growth this season, and so far we keep our estimate of
Kernel’s FY2022 EBITDA of about USD 560 mln, excluding Avere operations.