Kernel raises EBITDA 64% yoy, profit 12% yoy in 1QFY13

Kernel Holding (KER PW) reported 32% yoy growth in net revenue to USD 517.8 mln, driven mainly by its bulk oil (+52% yoy) and farming (+59% yoy) segments. Its share of bulk oil and farming products increased to 73% of total revenue in the quarter, compared to 63% a year earlier. Kernel’s fastest growing segment was its export terminal, whose revenue was up 2.3x yoy on 1.9x yoy growth in throughput. While the terminal’s share in the top line was below 3% in 1Q13, its contribution to EBITDA was almost 11%. Kernel’s EBITDA increased 64% yoy (USD 29 mln yoy) with a nearly USD 10 mln contribution from each of the bulk oil, farming and grain-trading segments. The company’s 1Q EBITDA of USD 74.1 mln was verified by operating cash flow before working capital, which was USD 79.4 mln. The company’s bottom line improved just 12% yoy (to USD 36.8 mln) on higher non-operating, financial and tax costs. The company’s net debt increased 74% yoy to USD 907 mln, and net debt to guided FY13 EBITDA stood at 2.6x. Kernel also provided an update on its farming segment with yields for key crops having expectedly declined: for wheat by 8% yoy and for corn, sunflower and soybeans 23%-33% yoy. The company noted its sugar segment is under strategic review, while sugar beet yields improved this year 1.6x yoy. Despite the stronger quarter, Kernel confirmed its conservative full-year EBITDA guidance of USD 350 mln (roughly +8% yoy).

Alexander Paraschiy: The strong yoy growth in financials comes as little surprise as Kernel earlier reported spectacular growth in trading in most of its segments. In addition, soft commodity prices remain strong. With such spectacular quarterly growth, the chances that Kernel will outperform its guidance are growing. Nevertheless, the following quarters are likely to be much less impressive, mainly owing to Ukraine’s worse grain and oilseeds harvest this season.