Kernel crushing volume jumps 50% yoy in 1QFY20

Ukraine’s largest sunflower oil producer and grain
trader Kernel (KER PW, KERPW) reported its oilseeds crushing volume jumped 50.2%
yoy to 628.7 kt in 1QFY20 (July-Sept 2019), according to its operational update
published on Oct. 21. The company processed 5.0 kt of soybeans in 1QFY20, so
the total sunflower seed crushing volume was 623.7kt, or 49.0% yoy growth in
1QFY20.

Kernel’s total sunflower oil sales dropped 25.7% yoy
to 300.9 kt in 1QFY20. Its bottled sunflower oil sales comprised 8.4% of total
oil sales volume. Therefore, bottled oil sales fell 11.7% yoy to 25.3 kt and
bulk sunflower oil sales dropped 26.8% yoy to 273.4 kt in 1QFY20.

The company’s grain sales from Ukraine rose 17.4% yoy
to 1.62 mmt in 1QFY20, while physical grain trading volumes through its
Swiss-based company Avere dropped 59.8% yoy to 604.6 kt in 1QFY20. The
company’s export terminal throughput in Ukraine gained 21.6% yoy to 1.2 mmt in
1QFY20.

Kernel also updated the results of its farming
campaign. The company’s preliminary corn yield (71% of acreage under corn
harvested) was 8.5 t/ha, or 14.1% lower yoy. Its wheat yield rose 13.7% yoy to
5.8 t/ha, and its sunflower yield increased 13.7% yoy to 3.5 t/ha, while its
soybean yield slid 13.3% yoy to 2.6 t/ha.

Andriy Perederey: 
Kernel boosted its crushing volumes in 1QFY20 due to higher availability of
sunflower seeds on the market, caused by a higher harvest this season. The
Ukraine average sunflower seed yield was 2.4 t/ha, or 8.5% yoy higher,
according to the economy and agriculture ministry.

We expect that Kernel’s high crushing volumes will
have a positive impact on financial results in both 1Q and 2Q of FY20. Also, we
expect that its infrastructure and trading segments will be the key drivers of
the company’s revenue and EBITDA in 1QFY20. We are not changing our estimate
for total company EBITDA in the range of USD 380-390 mln in FY2020. We also
maintain our neutral view on KERPW bonds.