Kernel increases grain sales 12%, sunflower crushing 15% yoy in 9MFY15

Ukraine’s sunflower oil producer and grain trader Kernel (KER PW) reported a 2% yoy increase in grain sales to 1.33 mmt in 3QFY15 (Jan-Mar 2015), according to its operating update of April 20. Their sunflower seed crushing amounted to 704 kt, down 1% yoy, and has remained close to full capacity. Its sales of bulk sunflower oil decreased 6% yoy to 249 kt, which the company attributed to the schedule change in the sales of its forward contracts. Its export terminal throughput volumes increased 18% yoy to 1.22 mmt, while throughput of its Ukrainian terminals increased 33% yoy to 1.08 mmt. 

In 9MFY15, Kernel has shown double-digit increase in all its core business segments, including a 12% yoy increase in grain sales, a 15% yoy increase in sunflower seeds crushing and a 26% yoy growth in port terminals throughput.

The company also released an update regarding its farming business, guiding a 3% yoy increase in sowings to 383,200 ha, with corn remaining the key crop ( 41% of total, about 157,000 ha, down 12% yoy). Other important crops are winter wheat (about 73,000 ha, up 2.5x yoy), soybean (about 65,000 ha, up 3% yoy), and sunflower (about 57,000 ha, down 14% yoy). 

Roman Topolyuk: Kernel released another set of strong operating performances, with sunflower seed crushing in 3QFY15 coming in 5% higher than our expectations. A decline in bulk oil sales this quarter, caused by a timing of forward contracts, could be the reason for a reverse in 4QFY15. All-in-all, the company is heading to deliver 2.4-2.5 mmt of sunflower seeds crushing in FY2015, which is in accordance with the guidance of management (a 3-7% yoy increase or 80-83% capacity load). Other segments are also likely to contribute positively to the yoy improvement in financial performance, while the KER PW stock is still trading cheaply (4.6x EV/EBITDA versus an historical average of 6.5x on consensus EBITDA projections in FY2015 of USD 331 mln, +48% yoy).