Kernel oil sales rise 6% yoy in 9MFY16

Ukraine’s sunflower oil producer and grain trader Kernel (KER PW) reported on April 20 its oil sales surged 28% yoy and 8% qoq to 320 kt in 3QFY16 (January-March 2016). Its oilseed crushing volumes remained flat yoy at 704 kt. The sales growth was driven by strong production in the preceding quarter. In 9MFY16, oil sales grew 6% yoy to 775 kt.

Grain sales grew by 6% yoy to 1.4 mmt in 3QFY16, on the back of two developments. Firstly, a debottlenecking project was completed at its Ukrainian transshipment facility, which reached a historical high monthly utilization rate in March of 435 kt. Secondly, the company’s sales of grain and resales of third-party grain was induced by the reinstatement of VAT refunds on grain exports as of Jan. 1, 2016. In 9MFY16, grain sales were still 7% yoy lower at 3.7 mmt due to farmers’ lower than normal sales in preceding quarters.

Kernel’s port terminal throughput increased 20% yoy to 1.5 mmt in 3QFY16, and grew 12% yoy to 4.3 mmt in 9MFY16.

Roman Topolyuk: Kernel performed in the last quarter pretty much in line with management’s guidance of 2.7 mmt oilseed crushing in FY2016. Other segments are also doing well, and we expect to see another strong quarter for grain trading and port transshipment. We expect the company to report EBITDA of USD 375 mln in FY2016 (-5% yoy), which implies Kernel is trading at a compelling 2016 EV/EBITDA multiple of 3.2x, by our estimates. We reiterate our bullish view on the stock.