Kernel recovers sunflower production in 2QFY14

Ukraine’s sunflower oil producer and grain trader Kernel (KER PW) reported on Jan. 20 its operating update for 2Q and 1H of its fiscal year 2014 (starting in July). Kernel was able to significantly increase sunflower seed crushing volume in 2Q after it halved its seed processing yoy in 1QFY14. As soon as it collected the new sunflower harvest, Kernel’s crushing plants started working at full capacity, processing 726 kt of seeds in 2QFY14, 3.1x more qoq, though 5% less yoy. This resulted in 1HFY14 crushing volumes of 0.96 mmt, down 21% yoy.

Its grain trading division remained its top performer: sales increased 23% yoy in 2Q to 1.34 mmt, resulting in 39% yoy growth in grain sales for 1HFY14, mainly owing to the bumper harvest in Ukraine and Russia. The company’s port terminals throughput increased by merely 4% yoy in 2Q13, reflecting low demand for grain exports from local farmers due to low global commodity prices.

Alexander Paraschiy: The results are in line with our expectations that Kernel’s sunflower oil division would catch up to its production volume in the quarters that followed its 1Q lows. We believe that may add some confidence to investors that Kernel can recover its bottom line after its 1Q14 lows and deliver its guided result for the year, with EBITDA of USD 250 mln.