In October-December 2023, Kernel Agro Holding made additional investments to restore the transshipment of vegetable oils at the long-dormant Chornomorsk port, which it acquired in July 2023, allowing the company to start loading the first vessel with sunflower oil in January 2024.
“This was an important milestone in the revival of the company,” Kernel said in its quarterly report published on the Warsaw Stock Exchange.
It also notes that in December 2023, Kernel completed the acquisition of 100% of corporate rights in Reni-Oil LLC, a terminal in the port of Reni for transshipment of sunflower oil with a one-time storage capacity of 15 thousand tons of oil, for $24.75 million. It is indicated that this asset, located on the Danube, is important for the group, providing the ability to export sunflower oil even in the event of a blockade of the Black Sea ports.
According to the report, in December 2023, Kernel acquired a bulk carrier with a capacity of 50 thousand tons of grain, which became the third vessel in the company’s fleet and significantly expanded the group’s transportation and logistics capabilities.
In addition, in December 2023, Kernel launched the fifth cogeneration heat and power plant at one of its oil extraction plants with an installed capacity of 21 MW, which helps to increase resilience to the risk of potential power outages.
“According to the plan, the Group is working on commissioning a new modern oilseed processing plant located in Khmelnytsky region, which is scheduled to be commissioned in spring 2024. At the time of publication of this report, commissioning works have already begun. The plant with a capacity of 1 million tons of sunflower seeds per year will be the largest in Ukraine,” the document also says.
It specifies that in October-December 2023, the company spent $41 million on investments in fixed assets, including the purchase of a Supramax bunker.
As reported, in August last year, Kernel announced the purchase of vegetable oil transshipment facilities in the port of Chornomorsk for $19.4 million and a sunflower oil transshipment terminal in the port of Reni (both in Odesa region) for $24.75 million.
“The one-time storage of 105 thousand tons of sunflower oil will allow the group not to stop the operation of processing plants in case of transportation disruptions, as it was in the 2022-2023 financial years, and to smooth out logistics,” the agricultural holding commented on these acquisitions at the time. “Kernel added that the expansion of infrastructure is “vital” for the agricultural holding ahead of the commissioning of the Starokonstantinivsk oil extraction plant in Khmelnytsky region.
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.
In the first half of FY2024, Kernel’s net profit fell 3.6 times compared to the first half of FY2023, to $102 million, and EBITDA halved to $223 million, with revenue down 16% to $1.59 billion.
On Wednesday, the share price of Kernel, one of Ukraine’s largest agricultural groups, jumped by 26.7% on the Warsaw Stock Exchange, reaching the highest trading volume since mid-December last year.
According to the Warsaw Stock Exchange’s website, the shares rose from PLN10.49 to PLN13.30 at the opening of trading, with some deals being made at PLN13.90 per share.
As of 17:00 in Warsaw, the turnover reached 283.62 thousand shares, and the value of the transactions amounted to 3.50 million ($877 thousand at the current exchange rate).
Minority shareholders, who have united against the delisting plans and the earlier additional share issue, suggest that such activity may be related to the purchase of shares by the majority shareholder and the company’s CEO, Andrey Verevsky, to reach the 95% threshold and demand their mandatory redemption. However, there is no official confirmation of this information.
As reported, Verevsky’s Namsen increased its stake from 41.3% to 74.05%, or 62 million 222.46 thousand shares, as part of the share buyback announced in March 2023 for the further delisting of the agricultural holding from the Warsaw Stock Exchange: On May 12, Namsen bought back 30 million 248,449 thousand shares at a price of PLN18.5 per share (approximately $4.47 at the then exchange rate), which brought the total buyout price to approximately $136.1 million, while the company’s 2007 IPO was held at a price of PLN24.
During the over-allotment initiated by Wierewski in August 2023 among qualified investor shareholders, Namsen acquired another 212 million 634,916 thousand shares for a total over-allotment of 216 million shares. The purchase price was $0.2777 per share, for a total value of approximately $59.1 million, and the transaction was completed on September 1. The over-allotment shares are held in registered form and will not be admitted to trading on any stock exchange, Kernel said.
After the announcement on August 22, 2023, of the start of the pre-displacement and until September 15, the share price fell from PLN13.74 to a historic low of PLN6.34.
Subsequently, in November, Namsen acquired another 1.2 million shares in the company, or 0.4% of the total number, at a price of $1.875 per share, which, including treasury shares, increased Verevsky’s stake to 94.37% of the voting shares.
On March 21, Kernel’s shareholders’ meeting will consider reducing the company’s share capital by canceling 2.2%, or 6.602 million treasury shares owned by its subsidiary Etrecom Investments Limited. It is specified that as a result, the number of shares will be reduced to 293 million 429.23 thousand, and the share capital – to $7 million 748.29 thousand. In case of cancellation of treasury shares, the share of CEO Verevsky through his Namsen Limited will increase from 92.30% to 94.37%.
Minority shareholders have announced plans to challenge the move with the Luxembourg regulator and in the courts. On November 17, private investor Pavlo Boyko said that a group of investors was working with law firm Brucher Thieltgen & Partners. According to him, more than a thousand investors from all over the world have united, “from the smallest to 1 million shares.” The court will preliminarily consider the first lawsuit on March 18.
Before the war, Kernel was the world’s largest producer of sunflower oil (about 7% of global production) and the world’s largest 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.
“Kernel, one of Ukraine’s largest agricultural holdings, processed 811 thsd tonnes of sunflower seeds in the second quarter of fiscal year (FY) 2024, up 24% year-on-year, when the company’s operations were disrupted by power outages due to Russia’s attacks on Ukraine’s energy infrastructure.
“Two out of eight plants of the agricultural holding, which are located in Kharkiv region near the border with Russia, remain unavailable for work,” the company said in a financial report on its website on Monday.
According to the report, sales of sunflower oil in the second quarter of FY2024 increased by 13% compared to the same period last year and exceeded 388 thousand tons. High volumes of sunflower seeds processing are supported by various export logistics options, including deep-water Ukrainian Black Sea ports. At the same time, sales of bottled sunflower oil accounted for 6% of total sales.
In the first half of FY2024, Kernel’s elevator volumes increased by 21% year-on-year to 2.5 mln tonnes as the agricultural holding managed to complete the harvesting campaign in its Agriculture division on time, unlike the postponed harvesting campaign a year earlier.
According to the agroholding, it managed to increase export transshipment volumes through its terminals by 11.2 times in October-December 2023, up to 1,805 thousand tons, using the temporary commercial shipping corridor created by the Ukrainian Navy. This volume includes transshipment of grain, sunflower oil and meal, as well as transshipment services provided to third parties (65 thousand tons in the second quarter of FY2024).
This figure, according to Kernel, is 5% higher than the same period last year and is explained by the success of the agricultural holding, which was achieved during FY2023 as part of the Black Sea Grain Initiative.
However, export terminals operated below pre-war levels as they suffered from damage caused by Russian missile strikes on Kernel’s port infrastructure in the summer of 2023.
Due to the resumption of transshipment volumes at the export terminal, the volume of grain exports from Ukraine in the second quarter of FY 2024 increased 8.4 times compared to the previous quarter, reaching 1.705 thousand tons, the agricultural holding stated.
As reported, before the war, Kernel was the world’s largest producer of sunflower oil (about 7% of world production) and its exports (about 12%). It is one of the largest producers and sellers of bottled oil in Ukraine. It is also engaged in the cultivation and sale of agricultural products.
In the first quarter of FY2024, the company posted a net loss of $30.9 million, while the previous year ended with a net profit of $162 million, with revenue down 17% to $564 million.
“Kernel, one of Ukraine’s largest agricultural holdings, has been using its Aeneid and Mavka vessels to export agricultural products for the second year in a row and intends to further expand its fleet, the agricultural holding reported on Facebook.
“For the second year, we have been operating our own vessels and transporting Ukrainian products in the difficult conditions of the termination of the grain deal. (…) Two Kernel vessels, Aeneid and Mavka, are currently exporting Ukrainian products. The deadweight (maximum loading) of the bulk carrier Aeneid is 47,335 tons, and the Mavka tanker is 13,500 tons. We have no plans to stop and are already working on expanding the fleet,” the statement said.
The agricultural holding noted that the use of its own fleet is economically beneficial, especially during the period of inflated freight rates during martial law. The development of its own shipping gives impetus to the entire market and strengthens the country’s export capabilities, Kernel believes.
“The Black Sea remains the only alternative for Ukrainian exports. The deep-water ports are able to accumulate and ship large-tonnage consignments of more than 60 thousand tons. This makes it possible to optimize logistics processes and significantly reduce costs. All alternative routes have extremely high logistics costs,” the agricultural holding explained and promised to continue to strengthen Ukraine’s exports and contribute to food stability in Europe and the world.
As reported, before the war, Kernel was the world’s largest producer of sunflower oil (about 7% of global production) and its exports (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.
In the first quarter of FY2024, the company posted a net loss of $30.9 million, while the previous year ended with a net profit of $162 million, with a 17% decrease in revenue to $564 million.
According to the report, the book value per share for the year decreased from $20.7 to $6 (or PLN26.22), in particular due to an increase in the number of shares from 77.429 million to 147.864 million.
Kernel Agro Holding has completed the 2023 harvest and achieved a record corn yield of 10.2 tons per hectare, up 15% year-on-year, amid exceptionally favorable weather conditions during the season.
According to the company’s report for the first quarter of fiscal year 2024 (FY, July-October 2023), sunflower yield increased by 11% year-on-year to 2.8 tons per hectare, and soybean yield – 2.9 tons per hectare.
“Unlike last year, there were no serious disruptions during the 2023 harvesting campaign due to the war in Ukraine or other factors,” the document says.
According to the document, Kernel has completed sowing winter crops for the 2024 harvest, allocating 93 thousand hectares for winter wheat and 14 thousand hectares for rapeseed, while last year winter wheat plantings were significantly lower – 60.4 thousand hectares, or 17% of the sown area, and the area under rapeseed was reported as “insignificant”.
The document specifies that due to the reduction of corn area by 44% to 84.4 thou hectares, the harvest decreased by 35% to 861 thou tons, while the increase of corn area by 75% to 61.1 thou hectares with the growth of yield by 44% to 6.7 t/ha allowed to harvest 2.5 times more – 406 thou tons.
As for oilseeds, the soybean harvest exceeded last year’s by 10 times, amounting to 188 thsd tonnes, thanks to the same expansion of the area while maintaining yields. Sunflower was harvested in the amount of 335 thou tons, which, due to the increase in yield, allowed the company to exceed the previous year’s figure by 1% while maintaining the area by 8% – up to 119.7 thou hectares.
The area under other crops this year was reduced by 32% to 28.4 thousand hectares, according to the report.
“Kernel also reported that during the three months ended September 30, 2023, it sold one of its elevators in Kharkiv region: with a net asset value of $175 thousand, the cash consideration received amounted to $1.067 million.
It is noted that in December 2023, Kernel launched the group’s fifth cogeneration thermal power plant at the Prydniprovskyi oil extraction plant with an installed capacity of 21 MW.
The company confirmed that it plans to commission a new state-of-the-art extraction plant in Khmelnytsky region in spring 2024 with a capacity of 1 million tons of sunflower seeds per year, making it the largest in Ukraine.
The report specifies that since the beginning of the war, 1502 employees of the agricultural holding have been mobilized to serve in the Armed Forces of Ukraine or joined territorial defense units, of which 648 have been demobilized and returned to work, 39 employees were killed and 87 others were injured.
As reported, in the first quarter of FY2024, Kernel posted a net loss of $30.9 million, while the previous year ended with a net profit of $162 million, with revenue down 17% to $564 million.
According to the report, the book value per share for the year decreased from $20.7 to $6 (or PLN26.22), in particular due to the increase in the number of shares from 77.429 million to 147.864 million.
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.
