Kernel rating affirmed by Fitch, outlook down to stable
11 February 2022
Fitch has revised its outlook on its foreign-currency
(FC) issuer default rating (IDR) for Ukraine’s leading farmer and seed oil
producer Kernel (KER PW, KERPW) to stable from positive, according to a Feb. 10
report.
The rating agency has affirmed its FC IDR for Kernel
at BB-, two notches higher than Ukraine’s sovereign, citing strong
hard-currency debt service ratios.
The rating action follows the revision of Fitch’s outlook
on Ukraine’s sovereign rating, the report said. Fitch’s outlook on Kernel’s
local-currency issuer default rating remains positive.
Kernel’s revenue will amount to USD 6.4 bln in FY22
(FY21: USD 5.65 bln) driven by the launch of new oil processing capacities and
continued growth in trading operations, Fitch said. Over FY23-25, Fitch expects
flat to low-single-digit-decline dynamics for the company’s revenue.
EBITDA at Kernel will amount to USD 620 mln in FY22
(FY21: USD 716 mln, as adjusted by Fitch). EBITDA margin will decrease from
12.7% in FY21 to around 10% in FY22 and to 6-7% in FY23-25 as the assumed
normalization of profitability in trading and farming operations will be only
partially set off by margin recovery in oil processing. Kernel’s sustainable
annual EBITDA will be around USD 400 mln.
CapEx will amount to USD 260 mln in FY22 (FY21: USD
187 mln) and will drop to around USD 85 mln per year in FY23-25. No material
M&A is expected up to FY25.
Annual dividends will grow from USD 37 mln in FY22 to
USD 43 mln by FY25, whereas the USD 250 mln share-buyback program
will end in FY23.
Fitch expects Kernel to refinance any upcoming
material debt maturities well in advance, and ensure a hard-currency debt
service ratio above 1.5x over FY22-23 with sufficient headroom.
Dmytro Khoroshun: Kernel might
have some extra cash to spend (returns to shareholders, early debt retirement,
investments) during FY23-24 beyond of its current USD 250 mln buyback program.
This is because the company’s debt maturities should be substantially smaller
than its free cash flow during these two years.
