Kernel, one of Ukraine’s largest agricultural holdings, posted a net loss of $30.9 million in the first quarter of fiscal year 2024 (FY, July 2023-June 2024), while the company ended the previous year with a net loss of $162 million.
“The net loss … amounted to $31 million, which was the second quarter in a row in which the company reported a negative net result (the net loss of the fourth quarter of FY2023 was $138 million – IF-U),” the company said in a report on the Warsaw Stock Exchange.
Kernel’s consolidated revenues in the first quarter of 2024FY decreased by 17% compared to the first quarter and by 26% compared to the fourth quarter of 2023FY, amounting to $564 million.
“The main factors that contributed to this decline were a decrease in grain exports and the impact of lower prices for all commodities,” the document explains.
It is indicated that the change in the fair value of biological assets resulted in a $10 million loss in the first quarter of 2024 compared to a $2 million loss in the first quarter of 2023, lower prices led to a $23 million write-down of inventories, and net losses from impairment of financial assets amounted to $20 million, mainly reflecting provisions recognized for receivables.
In addition, it is specified that shipping and handling costs accounted for 22% of cost of sales in the first quarter of FY2024, and as a result of all of the above, gross profit in the first quarter of FY2024 fell by 70% year-on-year to $52 million, but this is better than the loss of $22 million in the fourth quarter of FY2023.
According to the report, general and administrative expenses in the first quarter of FY2024 fell by 29% year-on-year to $31 million, mainly due to lower wages and salary-related expenses.
Kernel’s EBITDA in July-September 2023 fell almost ninefold compared to July-September 2022, from $168 million to $19 million.
“The Oilseeds Processing segment remained the driver of the group’s profitability, contributing $58 million to Kernel’s profit. EBITDA increased by 15% compared to the fourth quarter of FY2023. These results reflect strong sales during the reporting period and a consistently high EBITDA margin of $158 per tonne of vegetable oil sold,” the report says.
“Kernel explained that it benefited from established export routes outside of Ukraine’s Black Sea ports, which allowed it to maintain high export volumes despite the blockade of the Black Sea. In addition, the weak profitability of sunflower processing, which prevailed in the summer of 2023, improved significantly in September with the arrival of a new sunflower crop on the market.
It is indicated that in the conditions of inaccessibility of the Black Sea for the group’s exports, the EBITDA of the Infrastructure and Trade segment amounted to only $6 million: Avere’s profitable trading operations slightly covered the loss of infrastructure and logistics assets in Ukraine.
The Agriculture segment generated a $23 million EBITDA loss in the first quarter of fiscal 2024.
According to the report, net cash used in investing activities amounted to $68 million in July-September 2023. It is specified that within the framework of investment activities, the group used $47 million to purchase property, plant and equipment (including the acquisition of a vegetable oil transshipment terminal in the port of Chernomorsk for $19 million), made an advance payment of $25 million for the acquisition of a vegetable oil transshipment terminal in the port of Reni, received $91 million from the sale of subsidiaries (mainly due to the final payment of remuneration for the removal of the director of Kernel), received $91 million.
Prior to the war, Kernel was the world’s largest producer of sunflower oil (about 7% of global production) and a major exporter (about 12%). It is one of the largest producers and sellers of bottled oil in Ukraine. In addition, it is engaged in the cultivation and sale of agricultural products.
Kernel’s net profit for FY2023 amounted to $299 million, while the company ended the previous year with a net loss of $41 million. The agricultural holding’s revenue for FY2023 decreased by 35% to $3.455 billion, but EBITDA increased 2.5 times to $544 million.
