Kernel set to report record high EBITDA of above USD 400 mln
21 October 2015
Ukraine’s leading sunflower oil producer Kernel (KER PW) will release its financial statements for the full fiscal year ended in June 2015 before the Warsaw Stock Exchange opens for trading on Oct. 22. Consensus expects Kernel to report EBITDA at USD 402 mln (+80% yoy) and net income at USD 133 mln.
Roman Topolyuk: We expect the company will deliver a record high P&L as our estimates show that EBITDA may have grown 83% yoy to USD 408 mln in FY2015, net income might have reached USD 96 mln compared to a USD 107 mln net loss in the prior year, net operating cash flow may have increased 4.5x yoy to USD 371 mln, while CapEx seems to be have been minimized at USD 25 mln (compared to USD 50 mln in the prior year). The company already reported on Sept. 1 that its net debt stood at USD 339 mln as of end-June 2015, compared to USD 684 mln a year before.
The primary drivers behind our expectations are a 8% yoy increase of sunflower crushing volumes to 2.522 mmt, strong EBITDA margin per ton of bulk oil (we model a 21% yoy increase to USD 199/t) and positive EBITDA from farming at USD 95 mln compared to a loss of USD 44 mln a year before (averaging USD 254/ha, driven by hryvnia depreciation and better farming practices). Driven by a strong grain harvest in Ukraine, grain trading – the volumes of which increased 12% yoy to 4.7 mmt and export terminal throughput that advanced 23% yoy to 4.8 mmt – will contribute to the company’s strong projected financial results. Its silo services segment may demonstrate a 48% yoy decrease in EBITDA generation to a more normalized number of USD 21 mln, after a record high result in FY2014, when unusually high rainfall elevated market demand for silo services.
We model a working capital release of USD 47 mln, which was a substantial driver for the decrease in working capital to USD 339 mln.
Kernel’s stock trades at 2.8x its forward EV/EBITDA multiple. We reiterate our bullish view on the stock.
