Kernel unaudited FY2012 financials in line with expectations

Kernel Holding (KER PW) reported preliminary results for 4Q and FY2012 (ended in June) last night. Revenue for the year increased 14% yoy to USD 2,169 mln, gross profit stayed flat yoy at USD 458 mln, and EBITDA increased 5% yoy to USD 325 mln. The company’s EBITDA margin for FY2012 amounted to 15% (-1 pp yoy) – an improvement after 9M12’s 13%, driven mainly by growth in profits from farming operations (mainly due to revaluation of biological assets). Kernel posted preliminary net income for the year at USD 199 mln (-12% yoy). In its operating update, the company reported 2.12 mmt of grains sold (+17% yoy), and 2.49 mmt of sunflower seeds crushed (+25% yoy). Management said they expected the next financial year to be as challenging as 2012, with sunflower seed production decreasing and sugar prices remaining weak in Ukraine, while strong soft commodities globally should lend some positive support. Kernel is going to crush 2.6 mmt of oilseeds (+4% yoy) and export 2.1 mmt of grains (flat yoy) and is planning to decrease sugar production in FY2013. A conference call for investors and analysts will be held today at 15:00 Warsaw time.

Alexander Paraschiy: The company’s financial results for the year were just slightly below our forecasts: revenue and net income are 3.6% and 4.8% below our estimates. While the reported EBITDA is 0.6% better than we expected, we warn that it includes some amount of IAS 41 gains that we did not account for in our forecasts. Nonetheless, the results allow us to keep our forecasts for 2013 unchanged, as well as maintain our BUY recommendation.