Kernel reports 11% increase in bulk oil sales in 1H FY17

Ukrainian sunflower oil producer Kernel (KER PW) boosted its bulk sunflower oil sales by 13% yoy to 336,000t in 2Q FY17 amid flat yoy production, the company announced in its Jan. 13 trading update. Bottled oil sales has increased 17% yoy to 36,000 litres, driven by exports. Sunflower seed crushing remained flat yoy at 908,000t, with processing capacity at near full utilization. Grain exports reached a record 1.5 mmt in 2Q FY17, a 15% yoy rise, fueling production at the company’s farming division.

For 1H FY17 (Jul. – Dec. 2016), bulk sunflower oil sales swelled 10.6% yoy to 503,000t, while bottled oil sales increased 18.1% yoy to 57,000 litres. Oilseed crushing declined 10.9% to 1.19 mmt, while grain sales rose 20.3% yoy to 2.71 mmt in 1H17.

Igor Zholonkivskyi: The market anticipated good results (Kernel stock jumped 13% in the last two sessions prior to the release) amid diminishing worries surrounding the sunflower seed deficit of May-June 2016 and lower crushing volumes. 

While the company still reported lower crushing volumes in 1H FY17, we believe the bumper sunflower seed harvest in Ukraine last season will provide ample supply of crushing seed in the full financial year, which should boost margins in the bulk sunflower oil segment. Performance in other business segments is likely to slightly improve as well, helping the bottom line. We confirm our bullish view on Kernel stock.