Kernel guides FY2018 EBITDA of USD 210-250 mln

In a Nov. 27 conference call, Ukraine’s largest
sunflower oil producer and grain trader Kernel (KER PW, KERPW) revealed its FY2018
EBITDA guidance at USD 210-250 mln, a decline from its actual EBITDA of USD 319
mln for FY2017. That implies the company’s management expectations for
sunflower seed crushing volumes at about 3,200 kt in FY2018. Also, management
said it expects a 15% yoy EBITDA decline in its grain and infrastructure
segment (implying FY2018 EBITDA at about USD 93.7 mln) due to lower harvest
yields this season. The company expects EBITDA in its farming segment at about
USD 85 mln, or a 41% yoy drop. Also, Kernel management said it is preparing for
constructing a new crushing plant in Western Ukraine.

Andriy Perederey: Segment
expectations imply that Kernel’s FY2018 EBITDA will be a little higher than USD
210 mln. At the same time, management said that the company has the ability to
generate EBITDA of up to USD 250 mln in FY2018. The weak expectations are based
on the low crop yields in this harvesting season, though they were higher than
those reported in 2013 and 2014 (3.48 t/ha on average, vs. 3.32 t/ha in 2014 and
3.46 t/ha in 2013).

So we expect farming segment EBITDA at about USD
150/ha vs. the company’s expectation of USD 143/ha. We are adjusting our FY2018
total EBITDA estimate for Kernel to USD 230-270 mln, based on the weaker margin
in its sunflower segment and lower EBITDA/ha in its farming
segment.