Kernel publishes operating results for Q2 FY2017

14 January 2017

Operating results of the largest sunflower oil producer in Ukraine in reporting quarter have been rather good, driven by results of Farming direction (which positively influenced volumes of grains trading) and general growth of sunflower seeds harvest in Ukraine (meaning ample raw materials for crushing operations).

Key figures
Q2 2017 Q1 2017 Q2 2016
Oilseeds crush, k tons 908 280 915
Sunflower Oil sales, k tons 372 189 328
Grains sales, k tons 1 525 1 181 1 323

In reporting period total volume of sunflower seeds crush has been close to record-high level of Q2 FY2016 and made 908k tons. It means that in last quarter crushers of the group worked with almost 100% capacity utilization. It is positive for the company, as despite good sunflower seeds crop in Ukraine in current season (at close to 13.5M tons vs. 11.7M tons in MY2015/16), competition for raw materials among crushers remains high (current crushing capacities in Ukraine are about 18.5M tons). In Q1 FY2017 crushing volumes of Kernel made just 280k tons, quarterly dynamics during last years looks as follows:

Kernel Holding sunflower seeds crush dynamics

Total sunflower oil sales in reporting quarter made 372k tons (the largest quarterly volume for last period of time), by 13.4% higher y-o-y and by almost two times higher than in Q1 FY2017. Apart from sales volume crushing margin of the company remains main question in assessment of segments performance (in Q1 FY2017 EBITDA margin for sunflowers seeds crush reached record-low levels of 7%, as for Q2 management expected some increase of the margin). Crushing margin will be reported along with financial results for the period.

Volume of Kernel grains sales in Q2 FY2017 made 1 525k tons, by 29% higher vs. previous quarter and by 15% - vs. Q2 FY2016. Explanation of growth in report are higher volumes of own Farming division production sales. Factually good grains sales dynamics was anticipated because of high stock of grains for resale on the balance sheet of the company as of beginning of reporting quarter (USD 80.6M vs. USD 47M a year ago).

Total grains production by Farming segment of the group in current season is estimated to grow by more than 30% y-o-y, which provides support to Grains trading. In general in a view of very good yields dynamics good results are expected for Farming segment in current season with EBITDA margin at above 40%.

Yields estimations for current season are represented in following table (t/ha):

Season 2016/17 2015/16 2014/15 2013/14 2012/13 2011/12
Corn 8.87.37.15.54.67.1
Wheat 6.05.15.44.33.43.7
Sunflower seeds 3.02.72.52.11.72.1
Soybeans 2.81.81.81.41.31.9

Financial report of Kernel for Q2 FY2017 is to be issued in the end of February.

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