Kernel sells two crushing plants in Russia

Ukraine’s largest sunflower oil producer Kernel (KER PW) announced on April 15 that it has divested its two oilseed crushing plants based in Russia in exchange for RUB 800 mln in cash, or the equivalent of USD 12 mln, we estimate. The total crushing capacity of these plants is 200 kt of oilseeds p.a.

Roman Topolyuk: Among Kernel’s main motivations for selling was competition in the sunflower seed crushing business in Russia, which has increased significantly in recent years after the new capacities were constructed, which led to squeezed margins.

The news is rather neutral. The company won’t be adversely affected by the sale considering these two plants broke even in FY2015 so their contribution to the company’s EBITDA during the period was close to zero, the company explained to Concorde Capital. We estimate Kernel’s total crushing capacities will reach 3.3 mmt, following the divestiture of Russian plants and the acquisition of a 560 kt plant in Ukraine, which might be finalized by September 2016. Meanwhile, Kernel’s stock is trading at an attractive 4.4x EV/EBITDA multiple, and we reiterate our bullish view on it.