Kernel EBITDA surges 28% yoy in FY2020

Ukraine’s largest sunflower oil producer and grain
trader Kernel (KER PW, KERPW) reported on Oct. 5 its FY2020 EBITDA surged 28.0%
yoy to USD 443 mln. The growth was driven by its infrastructure and trading
segment EBITDA, which more than doubled yoy to USD 216 mln, and its oilseed
crushing segment, whose EBITDA rose 39.4% yoy to USD 152 mln. Meanwhile, its
farming segment EBITDA dropped 26.4% yoy to USD 134 mln in FY2020.

The company reported its net revenue rose 6.0% yoy to
USD 4,106 mln and its net income dropped 37.6% yoy to USD 122 mln in FY2020. As
of June 30, 2020, the company’s net debt increased 41% yoy to USD 980 mln, with
most of the increase, or USD 287 mln, due to the introduction of the IFRS 16
standard. Kernel’s net debt/EBITDA ratio was 2.2x as of end-June 2020 vs. 2.0x
a year ago.

In FY2021, the company expects to process 3.5 mmt of
sunflower seeds (vs. 3.44 mmt in FY2020) and to export 9.5 mmt of grain (vs.
7.9 mmt last year). Also, the company plans its CapEx at about USD 270 mln in
FY2021.

The company estimates that Ukraine will reduce the
harvest of its key crops this season, including a 14% yoy decline of sunflower
seeds (to 14.2 mmt) and 8% yoy slide (to 67 mmt) of total grain harvest.

The company’s board recommends to pay USD 21 mln in
dividends from last year’s profits (flat yoy, USD 0.25/share), to be paid
“during the financial year ending 30 June 2021.”

Andriy Perederey: Kernel’s
EBITDA was higher than our expected range of USD 380-390 mlndue to an increase of its sunflower oil margin in 4QFY20 and much stronger
results of its infrastructure and trading segments. Going forward, we expect
pressure on the company’s margins in its trading and processing segments this
season, due to the reduced availability of its key crops on the Ukrainian
market, as well as weaker results in farming, due to expected weakening in crop
yields.