Kernel to launch greenfield plant in Russia in FY2015

Kernel (KER PW) provided details on its plans to construct a greenfield sunflower seed crushing plant in Russia during a conference call yesterday. The plant is expected to be operational in 2.5 years, as of FY2015, with a capacity of 600 kt oilseeds per annum (20% of Kernel’s current capacity) and targeted 70% capacity utilization ratio. CapEx required for the project is USD 100 mln, 70% of which is going to be covered by debt. Three potential locations are being considered, with construction expected to start in FY2013.

Yegor Samusenko: Incorporation of the project into our model yields an additional USD 33 mln in equity value (2% of the current MCap), based on project details provided by Kernel and assuming an unchanged capital structure; and incorporating our view on the long-term EBIT margin in the Russian sunflower oil sector (8% vs. Kernel’s view of 12%-13%). We also note that synergies from a potential grain trading business in Russia (which Kernel is likely to build on the same procurement system) could double the value of the project.