Kernel Posts Full-Year EBITDA Increase of 28% YoY to USD 440mn

October 11, 2020

Kyiv-based, Warsaw-listed Kernel Holding, Ukraine’s largest sunflower oil producer, said its EBITDA for full-year 2020 (the company’s financial year runs from July to June) increased by 28% YoY to USD 443mn, with the EBITDA margin edging up from 8.7% to 10.8%, according to figures published last week. Kernel’s revenue rose 4% YoY to USD 4.11bn while net profit declined by 38% to USD 118mn in the full year. In a segment breakdown, the sunflower oil business EBITDA was USD 152mn (+28% YoY), infrastructure and trading EBITDA surged to USD 216mn (+100% YoY), and the farming EBITDA was USD 134mn (-47% YoY) for the financial year.
In the Apr-Jun quarter alone, the company had EBITDA of USD 123mn (+102% YoY) and a net profit of USD 42mn compared to a net loss of USD 1mn in the same period of last year.
On the balance sheet side, Kernel’s net debt amounted to USD 980mn as of 30 June 2020, increasing 41% YoY due to the recognition of USD 302mn in liabilities related to land-leasing.
The company’s Net Debt/EBITDA ratio was 2.2x on 30 Jun 2020.

Kernel’s reported EBITDA for FY20 was 8% above our latest forecast, confirming further healthy growth of the company’s overall business. The lower net profit for FY20 was a result of a one-off loss of USD 46mn related to the transaction divesting the Taman Grain Terminal (located in Russia). Also, the adoption of the IFRS 16 standard related to land-leasing expenses led to a USD 22mn negative impact on the bottom line.

In the company’s core sunflower oil segment, there was a long-awaited improvement in the so-called "crushing margin" to USD 100 EBITDA per tonne of sunflower oil sold in FY20. This was driven by a strong harvest of sunflower seeds in Ukraine and a generally more favorable sunflower oil pricing environment. Oilseed processing is an export-oriented business, and 95% of Kernel’s produced sunflower oil is exported in bulk, with the EU, Iraq, India, and China all being key markets.
For Kernel’s 2021, we forecast that the company will increase its revenue by a further 10% YoY to USD 4.52bn, and will show net profit growth of 15% to USD 136mn.
Kernel’s stock has fallen by 17% YtD to PLN 39.60, due principally to the COVID-19 market downturn that occurred in March. We believe that the Kernel stock has a firm upside of 60% as its trading multiples look attractive, with trailing EV/EBITDA currently at 4.2x.


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