Kernel EBITDA rises 6% in 1QFY22

The EBITDA of Ukraine’s largest sunflower oil producer
Kernel (KER PW, KERPW) rose 8.6% yoy to USD 315 mln in 1QFY22 (July-September
2021), according to its report published on Nov. 26. The company’s oilseed
processing segment generated USD 15 mln of EBITDA, or 51.6% less yoy in 1QFY22.
The company’s EBITDA per ton of oil decreased 36.9% yoy to USD 66.9 in 1QFY22.
Its infrastructure and trading segment EBITDA rose 5.4% yoy to USD 117 mln and
its farming EBITDA rose 28.6% yoy to USD 207 mln in 1QFY22. The farming result
includes USD 85 mln of IAS 41 gains (down 20.8% yoy).

Kernel’s revenue rose 42.9% yoy to USD 1,343 mln in
1QFY22. Its oilseed processing segment revenue increased 22.55% yoy to USD 359
mln in 1QFY22. Its infrastructure and trading segment revenue increased 40.1%
yoy to USD 1,136 mln and its farming segment revenue jumped 62.2% yoy to USD
146 mln in 1QFY22.

Kernel’s net profit rose 3.4% yoy to USD 211 mln in
1QFY22. Its operating cash flow before working capital changes rose 1.6% yoy to
USD 192 mln. The company’s net debt was USD 1,014 mln on Sep 30 (vs. USD 1,017
mln a year ago) and its net debt-to-LTM-EBITDA ratio improved to 1.1x from 1.6x
a year ago.

The company also reported that it is expecting an
improvement of its oilseeds crushing margin and an 18% yoy increase in crushing
volumes (to 3.8 mmt of seeds) in FY2022. It also expects that its farming
EBITDA (net of revaluation gains) will increase this financial year. Meanwhile,
its outlook in the infrastructure and trading segment “remains blurred.”

Andriy Perederey: The decline
of the company’s crushing margin in 1QFY22 was driven by the poor availability
of oilseeds due to the delay in the harvest in this season (the peak of harvest
has shifted from September in the previous year to October this year).
Meanwhile, we expect that crushing margins will recover when the new harvest
volumes will be available at the market, or from 2QFY22. Aslo, we expect an
increase of volumes in the company’s crushing and trading segments due to the
better harvest this season. On the other hand, we see the possibility of
pressure on the company’s infrastructure and trading segment margins due to the
delayed harvest of crops and higher costs.

All in all, we continue estimating Kernel’s FY2022
EBITDA will be close to USD 560 mln, excluding Avere operations, and keep our
neutral view on KERPW bonds.