Kernel EBITDA improves 12% yoy in 9MFY20

EBITDA at Ukraine’s largest sunflower oil producer and
grain trader Kernel (KER PW, KERPW) surged 12.3% yoy to USD 320 mln in 9MFY20,
according to its earnings report released on May 29. The increase was driven by
its infrastructure & trading segment, in which EBITDA surged 66.0% yoy to
USD 161 mln, while its farming segment EBITDA dropped 22.7% yoy to USD 102 mln
in 9MFY20. The company’s oilseed processing segment EBITDA rose 2.3% yoy to USD
88 mln in 9MFY20, while EBITDA margins improved in oilseed processing by 14.9%
yoy to USD 85/t and in infrastructure & trading by 28.6% yoy to USD 27/t in
9MFY20.

Kernel’s 9MFY20 revenue slid 4.9% yoy to USD 2,909
mln, operating cash flow before working capital changes decreased 8.4% yoy to
USD 256 mln, while working capital investments more than tripled to USD 355
mln. The company’s net profit dropped 60% yoy to USD 76 mln in 9MFY20.

In 3QFY20, Kernel’s EBITDA jumped 89.1% yoy to USD 104
mln (or a 4.6% qoq decrease). The company’s oilseed crushing segment EBITDA
slid 16.1% yoy to USD 26 mln (a 33.3% qoq drop) and its crushing margin
declined 13.9% yoy to USD 68/t (and 39.8% qoq fell) in 3QFY20. The company’s
infrastructure & trading EBITDA tripled yoy to USD 65 mln (and 6.6% qoq
increase) in 3QFY20.

Andriy Perederey: In these
figures, we see our expectation being affirmed of the company’s EBITDA being
bolstered by its Infrastructure and Trading segment in FY2020 (half of the
company’s EBITDA was generated by this segment in 9MFY20). We are keeping
unchanged our estimate for FY2020 total EBITDA in the range of USD 380-390 mln
(vs. USD 346 mln a year ago). We are also maintaining our neutral view on KERPW
bonds.