Kernel bulk oil EBITDA drops 31% yoy in 1HFY17
28 February 2017
Ukraine’s leading sunflower oil producer Kernel (KER PW, KERPW) reported 1% yoy EBITDA growth to USD 202 mln in its 1HFY17 interim results published on Feb. 28. Revenue rose 4.5% yoy to USD 1,043 mln, while net income gained 13.6% yoy to USD 160 mln. Operating profit before working capital changes dropped 22.9% yoy to USD 170 mln. The company’s net debt-to-LTM-EBITDA climbed to 1.6x from 1.2x a year ago.
In its bulk sunflower oil segment, revenue improved 11.7% yoy to USD 484 mln as sold volumes increased 11.7% yoy to 508,000 tons, while EBITDA has plummeted 30.6% yoy to USD 40 mln in 1HFY17.
Grain trading and infrastructure business revenue rose 11.3% yoy to USD 548 mln in 1HFY17 on the back of 20.6% yoy growth in grain volumes to 2.7 mmt. EBITDA in this segment has advanced 17.2% yoy to USD 69 mln.
Farming segment revenue fell 20.6% yoy to USD 271 mln, while EBITDA declined 1.5% to USD 134 mln. This number includes USD 32 mln of unrealized profits from intra-group sales of agricultural products, which remained unsold to the third parties as of the end of the reporting period.
Kernel’s 2QFY17 EBITDA declined 10.3% yoy to USD 130 mln.
Igor Zholonkivskyi: Kernel’s first-half interim results are rather weak as profitability in its core bulk sunflower oil segment plunged due to a deficit of sunflower seed on the market created by high demand, which translated into higher costs. The company has barely managed to keep its total EBITDA number growing yoy due to the contribution of intergroup sales of its farming segment, but its operating cash flow has predictably declined more than 20%.
The situation with the sunflower seed deficit will continue to harm Kernel’s profitability in the short- to mid-term perspective. While Kernel certainly generates enough cash to be able to comfortably serve its debt, the company’s stock is likely to face pressure throughout FY2017 after reaching recent highs.
