Business news from Ukraine

Business news from Ukraine

Kernel’s share price jumped by 20.7%

On Monday, shares of Kernel agricultural holding rose sharply on the Warsaw Stock Exchange (WSE) after almost a month of falling due to an additional share issue.

According to the WSE, as of 11:17 a.m. Kyiv time, their share price jumped by 20.74% to PLN7.66 ($1.76 at the current exchange rate), while after the announcement of the additional issue on August 22 and until Friday, September 15, it fell from PLN13.74 ($3.36) to a historic low of PLN6.34.

On Monday, a total of 203 deals were made with 40.08 thousand shares for almost PLN0.27 million.

Market participants speculated that the drop could have been caused by the need for index funds to sell shares, as Kernel’s shares were excluded from all indices after the additional issue and the drop in free float.

As reported, Namsen Limited, the majority shareholder and CEO of Kernel Agro Holding Andriy Verevsky, acquired 212 million 634,916 thousand shares during the additional placement among qualified investor shareholders for a total volume of 216 million shares. The purchase price was $0.2777 per share for a total value of $59.05 million, and the transaction was completed on September 1. The over-allotment shares will be kept in registered form and will not be admitted to trading on any stock exchange, Kernel said. Prior to the placement, 84 million 31.23 thousand shares were in circulation.

Earlier this year, Verevsky increased his stake from 41.3% to 74.05%, or 62 million 222.46 thousand shares, as part of the share buyback and the announced delisting of the agricultural holding from the Warsaw Stock Exchange: On May 12, he 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 IPO in 2007 was held at a price of PLN24.

Taking into account the dilution and the fact that another 7.86% of the shares were owned by the issuer itself, the total number of shares owned by Verevsky reached 274 million 857.38 thousand, which, taking into account treasury shares, gives him almost 93.7% of the votes.

The company is currently awaiting the Polish regulator’s verdict on its delisting application, which is opposed by a number of minority shareholders.

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. It is also engaged in the cultivation and sale of agricultural products.

Kernel’s net profit for the first nine months of FY2023 (July 2022 – March 2023) increased by 36% to $437 million, while revenue fell by 45% to $2.715 billion.

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Kernel expects to increase production of grains and oilseeds due to higher yields

Kernel, one of the largest agricultural holdings in Ukraine, has almost completed harvesting winter wheat on an area of 60 thousand hectares and winter rapeseed on 10 thousand hectares, noting an increase in yields and forecasting an increase in production of all crops in the 2023 season, the company said in a statement on the Warsaw Stock Exchange.

According to the report, in the 2023 season, the agroholding expanded the area under winter wheat by 1.7 times, and winter rapeseed by twice compared to last year. Favorable weather conditions resulted in higher yields of these crops: winter wheat yields reached 6.6 t/ha, which is significantly higher than a year earlier, when it was 4.6 t/ha; winter rapeseed yields were 3.3 t/ha, compared to 2.5 t/ha a year earlier.

“Kernel has also allocated significant areas for spring crops, including 120 thou hectares of sunflower, 84 thou hectares of corn and 65 thou hectares of soybeans.

“Risks for the group’s spring crops (corn, sunflower and soybeans) are currently limited, so the group expects to get yields close to historical averages,” the agricultural holding said.

“Kernel assesses the harvest prospects in Ukraine as “generally favorable” and forecasts an increase in grain and oilseed production compared to the previous year.

Speaking about the prospects for sales of the grown products in FY2024, the baseline scenario of the agricultural holding envisages exports only through the Danube River ports and inland routes due to the susceptibility of agricultural infrastructure to destruction caused by Russia’s regular missile attacks.

“Kernel has already secured some capacity to export sunflower oil and meal, but has not yet secured a stable and cost-effective grain transshipment option. The agroholding announced the need for additional investments to increase grain export capacity and reduce logistics costs.

“At the beginning of the season, the profit forecast for FY2024 envisages a significant decrease in EBITDA due to the undermined productivity of the agriculture, infrastructure and trade segments, which is caused by relatively weak global grain prices and expensive export logistics,” the agricultural holding explained.

At the same time, Kernel expects the oilseeds processing segment to be the main source of profit for the group in fiscal 2024.

The agroholding reported that it does not have access to credit limits from banks and relies on accumulated cash. At the same time, it continues negotiations with various financial institutions to obtain CapEx loans.

Uncertainty over VAT refunds in the future and the possible risk of hryvnia devaluation also increase the agroholding’s exposure to foreign exchange losses.

“Any estimates of volumes and margins are very sensitive to the current operational situation in Ukraine due to the constant disruptions caused by the war. The holding’s work is aimed at reducing further risks of losses caused by possible future Russian attacks,” Kernel summarized.

Before the war, Kernel was the world’s leading producer of sunflower oil (about 7% of global production) and its exports (about 12%). The company is one of the largest producers and sellers of bottled oil in Ukraine. In addition, the agricultural holding is engaged in the cultivation and sale of agricultural products.

The largest co-owner of Kernel through Namsen Ltd. is Ukrainian businessman Andriy Verevsky, who this year increased his stake from 41.3% to 74.05% as part of the buyout and delisting of the company from the Warsaw Stock Exchange.

Kernel’s net profit for the first nine months of FY2023 (July 2022 – March 2023) increased by 36% to $437 million, while revenue fell by 45% to $2.715 billion.

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Kernel Agroholding is negotiating with creditors on deferring repayments until June 30, 2024

Agroholding “Kernel”, taking into account the continuation of Russia’s war against Ukraine, in the spring of 2023 initiated an extension of waivers (waivers) for another year – until June 30, 2024, the company said in a statement on the Warsaw Stock Exchange.

“At the moment, the process of agreeing such an extension with the majority of creditors is still ongoing. However, the Group has signed either 1) temporary moratoriums (standstills); 2) extensions; or 3) new waivers and consents (consents) under all credit facilities, pending final agreement with those lenders with whom extensions have not yet been finalized,” Kernel pointed out.

Agroholding noted that interest will continue to accrue and be paid in accordance with the terms of the loan agreements. “The company is also currently paying and intends to continue paying interest on the Eurobonds,” the release said.

“Kernel” recalled that earlier such waivers (Waiver Letters) in order to maintain stability and preserve business and assets for a period until June 3- June 2023 were signed in respect of, inter alia, loans of Natixis PXF, ING PXF, EBRD and EIB. Under these, the agroholding has obtained a deferral of any principal repayment, a waiver of specified potential or actual defaults or events of default arising from the war in Ukraine, but has been paying interest.

It is stated that the group has already agreed with those creditors that have not yet signed new waivers and consents, the principal terms of the extension of the terms until June 30, 2024, which are subject to final documentation and approval by the respective credit committees of each creditor. Their principal conditions, in addition to extending the maturity date to June 30, 2024, are the establishment of a capital expenditure basket sufficient to support the current scale of operations and the commencement of a shareholder support process in the form of a new capital injection of at least $60 million.

As of July 31, Kernel had $1 billion 445 million of interest-bearing debt (principal amount of bank loans and Eurobonds, excluding accrued interest and lease obligations), $1 billion 148 million of cash and cash equivalents and $327 million of inventory (including 1 million 282,000 tons of grain, 103,000 tons of oilseeds, 147,000 tons of sunflower oil and 111,000 tons of sunflower meal).

A substantial portion of the accumulated liquidity will be spent in fiscal year 2024 (FY, effective July 1, 2023 – IF-U) on working capital, capital expenditures for the development of an alternative export route across the Danube, repair of facilities, damaged as a result of Russian missile strikes, to complete construction and commissioning of an oil extraction plant in western Ukraine, and to address the maintenance backlog as a result of liquidity preservation measures taken in FY2022-FY2023, it said.

According to it, the group is considering investments in rolling stock, grain transshipment on the Danube River and river fleet to ensure a monthly export volume of about 300,000 tons with an estimated capital expenditure of about $50 million. The group does not have access to credit limits at banks, relying on accumulated cash, however, it continues to negotiate with various financial institutions for credit lines for working capital or capital expenditure. The uncertainty of future VAT refunds and the possible risk of hryvnia devaluation increase the risk of significant currency losses, Kernel adds.

Regarding the delisting, the intentions of which were first announced in early March this year, the company points out that on May 15 it filed an application with the Polish Financial Supervisory Authority (PFSA), and on July 13 it submitted to the PFSA an additional legal memorandum and other documents requested by the regulator. Kernel then sent a letter to the PFSA on Aug. 1 objecting to the applications filed with the regulator in the case.

“At the time of publishing this report, the company has not received any further information on the timing of the PFSA’s decision,” it said.

Kernel Agroholding was the world’s number one producer of sunflower oil (about 7% of global production) and its exporter (about 12%) before the war. It is one of the largest producers and sellers of bottled oil in Ukraine. In addition, it is engaged in growing agricultural products and their realization.

The largest co-owner of Kernel through Namsen Ltd. – is Ukrainian businessman Andriy Verevsky, who this year increased his stake from 41.3% to 74.05% as part of the buyout and delisting of the agroholding from the Warsaw Stock Exchange.

Kernel’s net profit for the first nine months of FY 2023 (July-2022-March 2023) rose 36% to $437 mln, while revenue fell 45% to $2.715 bln.

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“Kernel” completes harvesting of early grain crops with record yields

Agroholding “Kernel”, one of the largest in Ukraine, with a record yield completes harvesting of early grain crops, under which 70 thousand hectares are allocated, the press service of the agroholding reported.

“This year’s winter wheat yield, depending on the region of the cluster location, was from 5.8 to 7.3 tons/ha. The weighted average yield is almost 70% higher than last year’s figure,” the agroholding said on Facebook.

According to “Kernel”, on the post-harvest areas are implemented programs of biologization of farming. To support biodiversity and improve soil fertility, cover crops have already been sown on 22 thousand hectares.

It is noted that agronomic divisions of the agroholding continue to test and research the effectiveness of using different mixtures of cover crops to assess their impact on physical and chemical characteristics, microbiological activity of soil and phytosanitary condition of fields.

Before the war, Kernel Agro Holding ranked first in the world in sunflower oil production (about 7% of world production) and exports (about 12%). It is one of the largest producers and sellers of bottled oil in Ukraine. In addition, it is engaged in growing agricultural products and their realization.

The largest co-owner of Kernel through Namsen Ltd. – is Ukrainian businessman Andriy Verevsky, who this year increased his stake from 41.3% to 74.05% as part of the buyout and delisting of the agroholding from the Warsaw Stock Exchange.

Kernel’s net profit for the first nine months of FY 2023 (July-2022-March 2023) rose 36% to $437 mln, while revenue fell 45% to $2.715 bln.

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“Kernel” has bought “Ilyichevsk Oil and Fats Plant” for UAH 697 mln

The liquidation commission has sold the property of Ilyichevsk Oil and Fats Plant LLC (Chernomorsk, Odessa Region) for UAH 696.66 million to Poltava-Zerno LLC, 95% of which belongs to the Kernel agricultural holding.

According to information in Prozorro.Sale, the auction was held on July 26 with a starting price of UAH 689.6 million, and Poltava-Zerno was the only participant.

It is specified that the buyer has already paid UAH 55.04 million of the guarantee fee, part of which in the amount of UAH 13.93 million went to the remuneration of the operator of the electronic platform – LLC “Onylan-Market”.

The new owner received, in particular, a land plot of 8.58 hectares with communications, where the plant is located, a complex of buildings and structures, as well as transport, tanks, reservoirs, production lines, minibus and other property.

Ilyichevsk Oil and Fats Plant LLC is bankrupt. According to open data opendatabot.ua, as of 2020 its assets were estimated at UAH 205.324 million, profit – UAH 481.721 million, income – UAH 22.836 million. At the same time, debt obligations reached UAH 2.587 billion.

Agroholding “Kernel” before the war ranked first in the world in the production of sunflower oil (about 7% of world production) and its export (about 12%). The company is one of the largest producers and sellers of bottled oil in Ukraine. In addition, the agroholding is engaged in the cultivation of agricultural products and their realization.

The largest co-owner of Kernel through Namsen Ltd. – is Ukrainian businessman Andriy Verevsky, who this year, as part of the buyout and delisting of the company from the Warsaw Stock Exchange, increased his stake from 41.3% to 74.05%.

Kernel’s net profit for the first nine months of 2023FY (January-March 2023) rose 36% to $437 mln, while revenue fell 45% to $2.715 bln.

As reported, Kernel recently reported that 40% of its grain storage and transshipment capacity at the Chernomorsk port was damaged as a result of a missile attack by Russia on the night of July 19, and it will take at least 12 months to restore these assets. In addition to the damage to infrastructure during this attack, a fire at the Chernomorsk port partially destroyed and damaged 60,000 tons of grain prepared for loading onto the large-capacity vessel Alexis and which was to be shipped to China.

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“Kernel” increased oil sales by 5 times and grain exports by 6 times

Kernel Agroholding, one of the largest in Ukraine, processed 650.4 thousand tons of sunflower seeds in the fourth quarter of fiscal year 2023 (April-June), a 4-fold increase compared to the same period last FY.

According to the company’s report, processing was down 13% quarter-on-quarter, reflecting the usual sunflower seed shortage near the end of the season, which forced three of the group’s six operating plants to temporarily stop processing oilseeds in May-June.

“Two processing plants owned by the Group remain inaccessible in the high-risk area of the Kharkiv region with regular shelling by Russian occupiers,” the report states.

Overall, in 2023 FG processing grew by 15% to 2.51 million tons.

According to the report, vegetable oil sales in April-June 2023 increased by 14% quarter-on-quarter to 312,700 tons, including 21,000 tons of bottled sunflower oil, and the growth was fivefold compared to the fourth quarter of last year.

“The group continues to prioritize vegetable oil and meal exports over grain exports, given the more attractive margins in the oilseed processing value chain compared to grain export operations,” it said.

For the entire 2023 FY, sales reached 1 million 132.7 thousand tons, exceeding the previous FY by 17%.

It is pointed out that Kernel’s silo loadings in the fourth quarter of FY 2023 were seasonally insignificant at 98,000 tons, 50% higher than the fourth quarter of last year. As a result, total intake during FY 2023 was 2.83 million tons, down 32% from FY 2022.

According to the report, the transshipment volume of export terminals in Ukraine in April-June 2023 decreased by 13% quarter-on-quarter to 933.1 thousand tons, while there was no transshipment in the same period last year.

Overall for FY 2023, Kernel terminals transshipped 4 million 437.7 thousand tons of goods, 39% less than a year earlier, which the company attributed to failures in the grain deal.

“Russia terminated the grain deal on July 18, 2023. Thus, the Group’s future ability to export goods through Ukrainian Black Sea ports is unclear,” the report states.

“Kernel” recalled that on July 19, its assets in the port of “Chernomorsk” were subjected to a massive missile attack from Russia. As a result, grain transshipment facilities and grain stored in the port were significantly damaged. According to initial estimates, it will take considerable time to return the assets to operation.

According to the report, the group’s grain exports from Ukraine in the fourth quarter of FY 2023 amounted to 755,000 tons, down 8% from the previous quarter but 6 times higher than in the fourth quarter of FY 2022.

On a year-on-year basis, Kernel’s grain export volumes more than halved year-on-year to 3 million 833.2 thousand tons, the document specifies.

“Kernel” before the war ranked first in the world in the production of sunflower oil (about 7% of world production) and its export (about 12%), and was the largest producer and seller of bottled sunflower oil in Ukraine. In addition, the company was engaged in the cultivation of other agro-products and their sales.

Kernel’s net profit for the first nine months of 2023FY increased by 36% to $437 mln, while revenues fell by 45% to $2.715 bln.

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