Kernel boosts sunflower seed crushing 26%, grain sales 18% in 1HFY15
20 January 2015
Ukraine’s leading sunflower oil producer and integrated farming company Kernel (KER PW) reported its trading update for 2QFY15 (Oct.-Dec. 2014) on Jan. 20. Its grain sales volume increased to a record-high 1.40 mmt (+5.1% yoy), which the company attributed to boosted volume of own-harvested grains. Its export terminal throughput increased to 1.44 mmt (+13.3%) on higher grain exports and higher use of own ports in grain trading operations. Sunflower seed crushing volume dropped 3.5% yoy to 0.70 mmt, which the company attributed to a later start of the crushing season in Russia, while bulk oil sales increased 6.2% yoy to 278 kt owing to reduced inventories.
The quarterly results imply Kernel grain sales rose 18.2% yoy to 2.62 mmt and port throughput increased 29.5% yoy to 2.65 mmt in 1HFY15. Its sunflower crushing improved 25.9% yoy to 1.21 mmt and bulk oil sales grew 34.5% yoy to 481 kt in 1HFY15.
Roman Topolyuk: Despite Kernel’s slightly decreased crushing activity in 2QFY15 yoy, the company can make up sunflower oil output in the following quarters and thus remains on track to achieve its guided 2.4-2.5 mmt of crushing volume in FY2015. The solid profitability of its bulk oil segment (which we project to average at EBITDA of USD 191/t in FY2015), combined with the record harvest and robust operating performance of its grain trading, will contribute to 59% yoy growth in EBITDA to USD 339, we estimate.
The stock is trading at an EV/EBITDA ratio of 3.9x, based on the FY2015 numbers, compared to its historical average of 6.8x. Since the company is planning to minimize CapEx at around USD 55 mln in FY2015, deleveraging will be another important upside driver for the stock. We expect net debt will decrease 40% yoy to around USD 400 mln by the end of FY2015.
