2Q FY17 results – weaker crushing, and expectations for silo and grain trading too high
Kernel reported its 2Q FY17 (4Q16) results this morning (28 February). EBITDA came in at USDÂ 130m, down 10% yoy and 9% below our expectations. The chief misses vs. our forecast were in the bulk oil, grain trading and silo segments. The miss in bulk oil was the result of further pressure on crushing margins, which amounted to only USDÂ 88/t, while we expected USDÂ 100/t. The weak margin was the result of low seed supply, as farmers were not forced to use external storage facilities to dry seeds due to the dry weather during the sunflower harvest, which reduced their willingness to sell the whole crop right after the harvest. Additionally, the company highlighted the growing competition in the Ukrainian crushing market. The miss in grain trading was the result of the over-utilisation of silos during the corn harvest, due to record-high levels of corn and heavy rainfalls in late-autumn, which forced farmers to use external silos to dry crops. As a result, storage costs in the grain trading segment were unexpectedly high in 2Q. On the other hand, the heavy rainfall during the corn harvest supported the performance of the silo segment, although our expectations were even higher.Kernel Holding is a holding company. Co.'s is a diversified agribusiness engaged in the production and sale of bottled sunflower oil (sold under brand names Schedry Dar, Stozhar and Chumak Zolota), the production and subsequent export of bulk sunflower oil and meal, the wholesale trade of grain (mainly wheat, barley and corn), farming, and the provision of logistics and transshipment services n the ports of Ilyichevsk, Taman and Mykolaiv. The majority of Co.'s manufacturing facilities are primarily based in Ukraine and Russia. In addition, Co. is a private provider of inland silo services in Ukraine.
WOOD & Company is the leading investment bank in Emerging Europe. Founded in 1991 and head-quartered in Prague, our footprint spans the region and touches investors around the globe.
A pioneer in Emerging Europe, WOOD executed many of the first CEE equity trades and landmark investment banking transactions. Our electronic trading platform was the first in the region, and remains the best. We are continually expanding our relevance and reach in these ever-evolving markets.
Our equity market share reflects our stature: 7% in Warsaw, 20% in Bucharest, 16% in Hungary, 40% in Prague and 5% in Vienna. Our distribution is unparalleled, with the largest salesforce in the region, servicing a uniquely diverse investor base.
We couple local expertise with a truly international perspective. With offices on the ground in the region, and in key financial hubs such as London and Milano, we are never far from our clients and we remain at the forefront of what’s afoot in the CEE emerging and frontier landscape.
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