Kernel Holding is about to start new grains terminal construction

6 December 2016

During conference call with investors and analysts management of Kernel confirmed its intention to start new port terminal construction in Chernomorsk. Construction is to be started in following months, total transhipment capacity is to make 4M tons, estimated amount of investments USD 100M, terminal is to be launched in Y2018.

At the moment Kernel owns grain export terminal with annual capacity of 4M tons in Ukraine, while in Russia it owns 50% stake in Taman grain terminal (Kernels share of capacity 2.0Mt; partner for this project is Glencore). Both ports are deep water facilities. In case of new terminal construction total transshipment capacities of the company in Black Sea region will be at 10M tons, so that Kernel can become TOP exporter from the region.

In FY2016 total export terminal throughput volume of the company made 5.343M tons of grains. Dynamics during last years looked as follows:

Kernel Holding export port terminals transshipment volumes

During last years Kernel's EBITDA/ton of Terminals business segment (in Ukraine) made close to USD 10 (EBITDA margin at approximately 65%). We expect that gradually fobbing margin in Ukraine will decline (due to increase of capacities), so to calculate project's payback period we make following (relatively conservative) assumptions: annual new terminal transshipment volume - 3M tons, EBITDA per 1 ton USD 7, average cost of capital 10%. Under these assumptions annual EBITDA of new terminal will make close to USD 20M, discounted payback period less than seven years. In case transshipment EBITDA per 1 ton will remain on current level and annual transshipment volume will be closer to 3.5M tons, discounted payback period will be less than four years. In addition Kernel is to capitalize upon increased volumes of grains trading business (not included into payback period calculation).

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