14 September 2023
The development of Kernel in 2007-2012 was by more than a half financed by funds raised on the Warsaw Stock Exchange.
The conflict between Andrii Verevsky and other Kernel shareholders prompted us to go back fifteen years and analyze what impact the raising of funds on the Warsaw Stock Exchange had on the development of the group.
As of the end of financial year 2006 (June 2006), Kernel was a medium-sized company whose primary asset was significant inland silos capacity. Kernel's turnover in the 2006 fiscal year was $215 million, the total amount of assets - $156 million, which were mainly financed by bank loans ($93 million).
At that time, the group's land bank was only 16,000 hectares, and Kernel also owned two oil processing plants (with a total capacity of about 0.5 million tons of sunflower seeds crush per year).
During the 2007-2012 financial years, Kernel invested $800 million in its development (not including the increase in working capital related to business growth). During this time, the following significant changes took place in the company's assets:
- the land bank grew from 16,000 hectares to 250,000 hectares
- oil processing capacity - from 0.5 million tons to 3 million tons
- a grain terminal was purchased in Illichivsk (now Chornomorsk) with a total capacity of 4 million tons of grain transshipment per year
How was this development financed? The answer to this question is provided by the analysis of Kernel's financial statements for the relevant years.
Operating cash flow
12 -126 129 85 56 -24 132
IPO and other shares placements
0 234 0 81 140 5 460
Other financing cash flow*
64 80 36 -77 -27 220 296
Investing cash flow**
-57 -170 -95 -126 -126 -229 -803
**-investment in development - purchase of companies, purchase/construction of fixed assets
The total amount of funds raised on the Warsaw Stock Exchange made about $460 million (there were four placements of shares, as a result of which Andrii Verevsky's share in the company was reduced to 40%).
Another $296 million was debt financing. Total operating cash flow for 2007-2012 was $132 million. It included both company profits (operating cash flow before changes in working capital was $901 million) and financing the need for additional working capital).
As of the end of the 2012 fiscal year, with a turnover of $2.2 billion, Kernel's total debt load was almost $700 million - the debt load was significant, but far from critical.