Kernel increases revenues 32.5% yoy in 3Q FY2010

Kernel Group (WSE: KER PW), one of Ukraine’s largest domestic grain and vegetable oil producers, released its financials for the 3Q of its 2010 financial year this morning. According to the document, the group’s revenues increased 32.5% yoy to USD 269.4 mln, while EBITDA declined 7.0% yoy to USD 50.2 mln (EBITDA margin of 18.7%, down 7.9 pp yoy). The company’s net profit dropped 15.1% yoy to USD 40.0 mln (net margin of 14.9%, down 8.3 pp yoy). For the nine months ending March 21, 2010, the company posted revenue of USD 782.0 mln, down 9.7% yoy; EBITDA of USD 142.1 mln, down 11.5% yoy; and net profit of USD 122.5 mln, up 7.6% yoy.   Ruslan Patlavskyy: Despite top line growth in 3Q10 triggered by recovering sunflower oil prices (USD 839/mt, +36% yoy in 3Q10), 111% yoy bulk oil output increase to 85.2 ths mt and 19% growth in grain exports to 763 ths mt, Kernel’s 9M10 revenue remained 9.7% lower yoy on the back of 9M10 average sunflower oil prices being ~15% lower yoy. We maintain our FY2010 top line forecast of USD 1,052 mln (+0.5% yoy) as the average 4Q10E sunoil price should remain at the current ~USD 800/mt level (+7 yoy), enhancing Kernel’s financials during the last quarter of 2010 and supported by strong FY2010 bulk oil output, which we estimate at 307 ths mt (+37% yoy). We are waiting for further clarification from the company regarding its profitability decline in 3Q10.