Kernel EBITDA leaps 2.5x yoy in 2QFY15

Ukraine’s largest sunflower oil producer Kernel (KER PW) reported EBITDA of USD 142.4 mln in 2QFY15, which leaped 2.5x yoy and 77% qoq, according to financial statements published on Feb. 27. The result led to a 3.7x yoy jump in EBITDA in 1HFY15 to USD 222.8 mln.



The strong EBITDA of the farming segment, which came in at USD 43.6 mln in 2QFY15 (compared to a USD 42.2 mln loss a year ago), was among the primary drivers behind the robust performance. The segment’s profitability was fueled by steep hryvnia devaluation, a 16-28% improvement in crop yields and enhancements to operating technologies.



Kernel’s key segment, bulk oil production, also performed well, having generated EBITDA of USD 57 mln (+16% yoy, +39% qoq) as sunflower seed availability ensured around a 93% production capacity load during the quarter, thereby helping to generate a solid EBITDA of USD 204 per ton of bulk oil.



The 2QFY15 EBITDA of its grain-trading segment grew fourfold yoy to USD 15 mln (a 14% decline qoq), implying a robust 5% profitability margin. The strong harvest led to a 13% yoy increase in export terminal throughput in 2QFY15, which laid the groundwork for a 13% yoy advance in EBITDA. The silo services segment processed almost the same volume as a year ago (2.5 mmt, +1% yoy), but below average rainfall put the pressure on grain-drying services pricing, prompting the segment's EBITDA to plunge 55% yoy to 13.4 mln from an unusual high last year.



The company generated net profit of USD 44.1 mln in 2QFY15 and USD 66.4 mln in 1HFY15, compared to losses of USD 13.5 mln and USD 47.8 mln in the same year-ago period respectively.



Roman Topolyuk: Kernel is on track to make FY2015 a year of financial turnaround, propped up by a high capacity load of sunflower oil production and healthy margins, and combined with a profitable farming segment. In 2HFY15, the firm's EBITDA margin per ton of sunflower bulk oil may decline from USD 202-204/t seen in 1QFY15 and 2QFY15 to a level of USD 175-180/t, as was previously guided by management. But steep ongoing hryvnia devaluation will cause the farming segment to continue surprising to the upside.



While it is hard to predict what will be the average hryvnia exchange rate from January to June 2015 due to elevated macroeconomic uncertainty, at an average exchange rate of UAH 17/USD during FY2015, Kernel is set to beat the consensus full-year EBITDA estimate of USD 335 mln. At this level, the stock trades at an EV/EBITDA ratio of 3.6x compared to a historical average of 6.7x.

Источник: Конкорд Капитал