Kernel - new oilseeds crushing plant construction is under consideration

9 October 2017

The largest sunflower oil producer in the world is thinking over its further expansion, now new project is under consideration construction of new oilseeds crushing plant in the Western Ukraine.

Earlier management of the company stated its intention to increase oilseeds crushing capacities by 1M tons (in addition to existing 3.5M tons). However, despite significant decrease of crushing margin in Ukraine during last period of time potential sellers are unwilling to dispose of their assets at a prices proposed by Kernel.

As a result, it is possible that management of the group considers change in its strategy and plans to build new plant despite current oilseeds crushing overcapacity in Ukraine. The point is that competition between crushers in the Western Ukraine is not so high, as, for example, in the South of the country, while potential for sunflower seeds sown area increase is much higher vs. other parts of the country (in some regions of Ukraine sunflower seeds take more than 30% of total area, while in Western less than 10%).

Though we can not exclude that current news is part of Kernels strategy in negotiations with existing capacities owners (on our opinion one of clear targets can be ViOil) to decrease purchasing prices of crushing plants.

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