26 June 2023

The largest Ukrainian agricultural holding focuses on the processing and export of oilseeds, the market share among grain exporters is decreasing.

Kernel released its operating report for the fourth quarter of financial year 2023 (April-June 2023).

	1Q FY2023	2Q FY2023	3Q FY2023	4Q FY2023		4Q FY2022
Grains export, kmt	732	1 522	824	755		123
Sunflower seeds crush, kmt	461	653	744	650		157
Sunoil sales, kmt	202	345	273	313		61

*-the financial year of the company begins in July and ends in June, the 4th quarter - April-June.

In the reporting quarter, the volume of oilseed processing amounted to 650,000 tons, 13% less than in the previous one, and significantly higher than in April-June 2022 (in March 2022, the Kernel crushing plants were already stopped, and in the second quarter they were just starting to resume production).

Of the six crushing plants of Kernel which operated in the current season, the work of three was stopped during May-June, because as the end of the season approaches, sunflower stocks in Ukraine are significantly reduced.

Kernel's another two plants are located in the Kharkiv region and are relatively close to the war zone, so the work of these enterprises has not been resumed until now.

In total, since the beginning of the financial year (July 2022), Kernel enterprises have processed 2.5 million tons of oilseeds (+15% compared to the previous fiscal year).

Sales of sunflower oil in the reporting quarter amounted to 313,000 tons, which is 40,000 tons more than in January-March and five times higher than in the same period last year (when deep-sea ports were closed, export via alternative routes was just beginning to develop).

In the previous quarter, Kernel's margin on 1 ton of sunflower oil was $399, which is an absolute record for the last decade. We expect that the processing margin will decrease significantly from the record-high value, but the overall profitability will remain at a fairly decent for recent years value.

In total, in the financial year 2023, Kernel exported 1.132 million tons of sunflower oil, which is 17% higher than the previous year.

	FY2023	FY2022	Change, %
Grains export, kmt	3 833	7 969	-52%
Sunflower seeds crush, kmt	2 508	2 187	15%
Sunoil sales, kmt	1 132	967	17%

Since Kernel, under the conditions of limited logistical capabilities, continues to give priority to the export of sunflower oil and meal (compared to grain crops), in the grain export segment, operational results are significantly worse vs. the results of the sunflower processing direction.

During the reporting quarter, Kernel exported only 755,000 tons of grain, 8% less than in the previous quarter. As a result, Kernel's share among Ukraine's largest exporters dropped to 7% (before the full-scale invasion, the company's share among Ukraine's largest grain exporters was 15-18%).

In total, during the 2022/23 season, Kernel exported 3.8 million tons of grain (-52% compared to the previous marketing year). The company's share among the largest Ukrainian grain exporters was 7.8%.

The future prospects of the company regarding the export of grains look rather unclear due to the non-renewal of the agreement on the operation of the grain corridor from Ukrainian deep-sea ports (the agreement expired in mid-July), as well as taking into account the damages to the Kernel grain terminal as a result of recent Russian missile attacks on the Ukrainian port infrastructure.