Kernel Agro Holding, one of the largest in Ukraine, processed 744 thousand tons of sunflower seeds in the third quarter of FY2023 (January-March), an increase of 32% compared to the same period last FY, operating six oilseeds processing plants.
“Vegetable oil sales in Q3 FY2023 increased only 1% from the same period last year to 273,000 tons, including 20,000 tons of bottled sunflower oil,” the company said on the Warsaw Stock Exchange.
According to it, two oil extraction plants belonging to the group remain inaccessible in the high-risk zone of Kharkiv region with regular shelling by Russian occupiers.
“The group managed to increase the utilization of its plants in January-March 2023 compared to the previous quarter, given the stabilization of electricity supplies in Ukraine and the expansion of the grain corridor,” Kernel pointed out.
Overall, in the first nine months of FY 2023 sunflower processing volume decreased by 8% – to 1 million 858.08 million tons, and oil sales – by 10%, to 819.96 thousand tons.
According to Kernel, due to the postponed 2022 harvest campaign, which was postponed until the winter of 2022/2023, elevator loading in the third quarter of FY 2023 reached an unusually high level of 687,000 tons. However, volumes for the first nine months of the season were down 34% from the same period last year to 2.7 million tons, reflecting a lower 2022 crop compared to the 2021 season.
It is pointed out that the volume of transshipment of export terminals in Ukraine in Q3 FY2023 almost halved compared to the same period last year to 1.1 million tons of grain, sunflower oil and meal, compared to 1.7 million tons of transshipment in the previous quarter.
“The Group’s export volumes are highly dependent on the operation of the “grain corridor” in the Black Sea. Although the grain corridor deal was extended in March 2023, it remains unclear for how long. “Moreover, in the last few days, ship inspections were completely stopped as the Russians refused to perform their duties to interrupt the initiative,” Kernel noted.
The company added that, in addition, stiff competition between Ukrainian terminals for quotas for agricultural exports through the “grain corridor” and the existing quota distribution mechanism are unfavorable for market leaders like Kernel, as historically smaller operators handling relatively smaller volumes have received disproportionately high quotas, making it impossible to maximize exported products.
“Recent import and transit restrictions imposed by neighboring EU countries further reduce agricultural exports from Ukraine,” the company pointed out, specifying that since the launch of the “grain initiative,” 87% of its export volumes have been shipped to foreign markets through Black Sea ports, 6% through Danube ports and 7% through domestic routes.
Continued difficulties with grain logistics in the Black Sea region led to a 61% year-over-year decline in grain exports from Ukraine in Q3 FY2023 to 0.8 million tons, Kernel added.
“To maximize operational efficiency, the Group gives preference to sunflower oil and meal ships rather than bulk grain ships (given the more attractive margins in the Group’s oilseed processing business), although this approach reduces grain export volumes, as logistics capabilities remain a key bottleneck,” the statement said.
According to him, the volume of transshipment of export terminals in Ukraine decreased by 52% to 3 million 504.59 thousand tons and grain exports – by 61% to 3 million 77.7 thousand tons in 9 months of FY2023.
“Kernel” also reported that at the time of the report and since the beginning of a full-scale invasion of Ukraine by the aggressor, 1405 employees of the Group were mobilized in the Armed Forces of Ukraine or joined the territorial defense units. Of these, 558 were demobilized and returned to work, 22 employees were killed, and more than 70 employees were wounded.
“Before the war Kernel was the world’s number one producer and exporter of sunflower oil (about 7% of world production) and the largest producer and marketer of bottled sunflower oil in Ukraine. The company was also engaged in cultivation of other agricultural products and their sale.
In FY2022 (July-2021 – June-2022), the holding posted a net loss of $41 mln versus $506 mln net profit in the previous FY, while its revenue decreased by 5% to $5.332 bln and EBITDA decreased by 3.7 times to $220 mln.
Kernel, one of Ukraine’s largest agricultural holdings, bought the Danube Prom Agro river terminal in the Ukrainian port of Reni on the Danube in February 2023, according to the company’s semi-annual report.
“The terminal has flat warehouses with a single storage capacity of 12,000 tons, and the acquisition is part of the company’s strategy to provide backup options in case Black Sea ports become unavailable as a result of the March 2023 grain deal being terminated,” the agri-holding said.
It noted that it intends to continue investing in its operations in the port of Reni to expand transshipment capacity, and such investments will be attracted by the USAID Sustainable Agriculture Initiative, which has agreed to purchase and supply the equipment needed for such expansion.
In addition, Kernel announced that on March 3, 2023, it closed the sale of a number of farms with a 134,000-hectare land bank, as well as related agricultural infrastructure, equipment and working capital, to companies associated with Kernel’s largest shareholder and board chairman, Andriy Verevsky, as announced in April 2022. This was preceded in February by the final approval of creditors to complete the transaction.
Oleg Vlasenko was the beneficiary of Danube Prom Agro, according to information in the state register. The company’s revenues in 2020 were 1.86 million hryvnia, and its assets at the end of the year were 4.73 million hryvnia.
In April 2022, Kernel’s board of directors decided to divest some of its 134 thsd ha crop farms and sell the assets to Verevskyy companies for $210 mln. The company announced that it wanted to reduce business risks and improve medium-term liquidity amid Russia’s military invasion of Ukraine.
As reported, in the first half of FY 2023 (July-December 2022), Kernel decreased its net profit by 12.6% YoY to $370.31 million, while revenues fell by 41.3% to $1 billion 889.78 million.
“Kernel, one of Ukraine’s largest agribusiness groups, earned $208.71 million in net income in the second quarter of fiscal year 2023 (FY, July-September 2022), down just 2.1% from the same period in the previous FY.
According to a financial report on the company’s Web site Friday evening, the agriholding’s revenue for the period fell 34.2 percent to $1 billion 235.28 million.
Gross profit was down 14.9 percent to $294.06 million, operating income was down 2.3 percent to $244.36 million and EBITDA was down 5.1 percent to $277.15 million.
These numbers are significantly better than the first quarter of this fiscal year.
The company attributed the 34% year-on-year decline in revenues to lower exports of grain, sunflower oil and meal.
The report notes that the net change in fair value of biological assets did not have a significant impact on the group’s results in the second quarter, with a profit of $0.3 million versus a profit of $27 million in the same period last year.
According to the document, shipping and handling costs accounted for 23% of cost of sales in October-December 2022, up 120% quarter-on-quarter and 64% quarter-on-quarter, reflecting sharply higher logistics costs in exporting goods from Ukraine. This caused a 15% decrease in gross profit.
“Kernel also recognized a $5 million gain from the reversal of previously recognized asset impairments, primarily related to inventories located in territories previously occupied by Russia, as the company was able to access and use such inventories in its operations.
General and administrative expenses in the second quarter of fiscal 2023 were $59 million, an increase of 33% over the first quarter of fiscal 2023, reflecting higher payroll-related accruals.
Regarding EBITDA, Kernel clarified that in the Oilseeds Processing segment, it increased 10% year-over-year to $66 million, mainly due to the second consecutive quarter of strong profitability for those players who were able to organize the logistics of sunflower oil exports from Ukraine.
“Despite improved profitability year-over-year in the reporting period for all businesses in the Infrastructure & Trading segment, a more than two-fold decline in export volumes led to a 46% year-over-year decline in segment EBITDA to $62 million,” the report said.
According to it, the Agriculture segment recorded a solid EBITDA of $204 million, up 45% from last year. This growth is largely due to the devaluation of the hryvnia, the document said.
Kernel added that its net profit from exchange rate differences in the reporting period amounted to $8 mln.
Kernel’s net debt, according to the report, decreased during the quarter by 30% – to $1.048 billion, and the ratio of net debt to EBITDA decreased from 13.5 to 11, but it is still much higher than a year ago, which was 1.9.
Overall, in the first half of 2023FG Kernel’s net profit decreased by 12.6% to $370.31 million compared to the same period last year, while revenues fell by 41.3% to $1 billion 889.78 million.
Gross profit was down 30.8% to $467.41 million, operating income was down 21.8% to $386.83 million and EBITDA was down 21.9% to $445.52 million.
As reported, Kernel ended FY 2022 with a net loss of $41 million versus $506 million in net income in the previous fiscal year on a 5% decline in revenue to $5.332 billion.
Kernel Ukrainian Agro-Industrial Group received an award from the UN Global Compact in Ukraine for its contribution to the creation of an anti-corruption video course. The course explains the principles of transparent business conduct and anti-corruption practices for small and medium enterprises.
According to the holding’s Facebook page, it joined the circle of organizations that worked on the development of the UN Global Compact’s Anti-Corruption program in Ukraine.
It is specified that the video course consists of five training modules lasting 5-8 minutes each, which reveal the principles of transparent business conduct and anti-corruption practices in Ukraine. You can watch the educational series on the portal “Diya.Biznes” and the platform “Diya.Digital Education”.
The course is designed to deepen entrepreneurs’ knowledge of anti-corruption processes to keep the country’s economy healthy.
“Kernel” before the war was the world’s number one producer of sunflower oil (about 7% of world production) and its exports (about 12%), and was the largest producer and seller of bottled sunflower oil in Ukraine. In addition, the company was involved in other agricultural products cultivation and sales.
The largest co-owner of Kernel, through Namsen Ltd. is Ukrainian businessman Andrei Verevskyi, with a 39.3% stake.
In FY2022 (July-2021 – June-2022), the holding posted net loss of $41 mln against $506 mln net profit in the previous FY. Its revenue decreased by 5% – to $5.332 bln, while EBITDA decreased 3.7 times – to $220 mln.
At the end of 2022, Kernel Agro-Industrial Holding acquired a strategically important asset, the OilExport Terminal, from the Pivdennyi port in Odesa region for $19.8 million, as it reported in its financial report the day before.
As the company reported on Facebook on Wednesday, the terminal with silos with a total capacity of 49.4 thousand tons of simultaneous storage of the main types of vegetable oils can accept and separately store sunflower, soybean, and rapeseed oil.
At the same time, it is noted that the new asset is strategically important for Kernel given the current inability to transship vegetable oil through terminals in the port of Mykolaiv, which accounted for about half of the total transshipment of this product in Ukraine in 2019-2022 marketing years.
“Mykolaiv is of historical importance in this regard. Due to the full-scale war, the city’s port and terminals have been shut down, and they are currently outside the grain corridor. Therefore, we are compensating for temporary losses at the expense of OilExportTerminal in Pivdennyi,” explained Yevhen Osipov, CEO of the holding, as quoted by the press service.
As reported, Kernel said in its financial report that it acquired OilExportTerminal in December 2022.
The holding also clarified that in the first half of FY2023 (July-2022 – December-2022) it sold 546.8 thousand tons of sunflower and rapeseed oil (-14% compared to the same period in FY2022) and processed 1.11 million tons of oilseeds (-24%).
“Prior to the war, Kernel was the world’s largest producer of sunflower oil (approximately 7% of global production) and its exports (approximately 12%), and was the largest producer and seller of bottled sunflower oil in Ukraine. In addition, the company was engaged in the cultivation and sale of other agricultural products.
The largest co-owner of Kernel through Namsen Ltd. is Ukrainian businessman Andriy Verevsky with a 39.3% stake.
In fiscal year 2022 (FY, July-2021-June-2022), the holding made a net loss of $41 million against a net profit of $506 million in the previous year, its revenue decreased by 5% to $5.332 billion, and EBITDA decreased by 3.7 times to $220 million.
Kernel, one of the largest Ukrainian agro-industrial groups, in the second quarter of fiscal 2023 (FY, Q2 – September-December 2022) decreased its sales of vegetable oils (sunflower and rapeseed) by 17% as compared to the same period of the previous FY – from 416,500 tons to 344,700 tons.
According to the report published on the company’s website, the total processing of oilseeds in the specified period decreased by 34%, from 985.4 thousand tons to 653.2 thousand tons.
The holding explained the decrease of production and sales volumes by the stoppage of three of its nine oil extraction plants (IEP) in Kharkiv region, caused by the military risks from the Russian Federation. In addition, the group’s production performance was affected by Russian rocket attacks on Ukrainian critical infrastructure, which led to power outages across the country, the report said.
“Due to regular power outages, Kernel had to temporarily suspend processing operations at two of its oilseed processing plants during November-December 2022, while the remaining four oil extraction plants (OEPs) operated relatively steadily thanks to cogeneration thermal power plants,” the holding explained in the report.
According to the report for the first half of FY 2023 (July – December 2022) Kernel sold 546.8 thousand tons of sunflower and rapeseed oil (-14% compared to the same period of 2022) and processed 1.11 million tons of oilseeds (-24%).
The Group halved the volume of crops supplied to its elevators in the second quarter of FY 2023 as compared to the second quarter of FY 2022 to 1.51 million tons. The company delivered 2.0 million tons of raw agricultural products to elevators in 6 months of FY 2023 – by similar 50% less than in 6 months of FY 2022.
“Kernel” also noted that because of the military aggression of the Russian Federation in Ukraine, 18 of its employees were killed and 61 employees were injured. A total of 1,333 employees of the group participated in the war, of which 532 were demobilized and returned to work.
“In December 2022, one of the group’s MEZs in the Kharkiv region came under missile fire from Russia. Due to its location in a high-risk area and constant shelling in the region, it is not possible at this time to properly assess and evaluate the damage to the facility. No other Kernel infrastructure was damaged during the reporting period,” the report states.
Kernel’s total exports of crops in the second quarter of FY 2023 decreased by 56% compared to the same period last fiscal year – to 1.52 million tons, and in the first half of the year – by 61%, to 2.25 million tons. Export was carried out mainly within the framework of Istanbul grain deal, while negligible volume of agricultural products was exported through alternative channels (railroad, river, automobile transport).
The holding said in a report that in December 2022 it successfully completed the acquisition of a 100% stake in the Pivdennyi oil transshipment terminal (Odessa region, Black Sea) for $19.8 mln.
“Kernel is the world’s largest producer and seller of bottled sunflower oil in Ukraine, accounting for 7% of world production and 12% of exports. In addition, the company was involved in other agricultural products cultivation and sales.
The largest co-owner of Kernel, through Namsen Ltd. is Ukrainian businessman Andrei Verevskyi, with a 39.3% stake.
In FY2022 (July-2021 – June-2022), the holding posted net loss of $41 mln against $506 mln net profit in the previous FY. Its revenue decreased by 5% – to $5.332 bln, while EBITDA decreased 3.7 times – to $220 mln.
