“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.
Kernel, one of Ukraine’s largest agro-industrial groups, has started direct purchases of nitrogen fertilizer Anvistar from Polish producer Anwil S.A. of PKN Orlen Group as part of early preparations for the next agricultural season.
As the holding said on Facebook Wednesday, the fertilizer was delivered by truck and transferred to rail cars at the Polish-Ukrainian border, and the cargo is already on its way by rail to Kernel’s warehouses.
“We are purposefully expanding our network of partners, diversifying risks and experiencing a new quality of agribusiness products. I am sure that this was only the first step on the way to future partnership,” the holding quotes Igor Stelmashchuk, head of its Agribusiness commercial division, as saying.
As reported, Ukraine’s largest producer of fertilizers Ostchem of nitrogen holding Group DF Dmytro Firtash in 2022 reduced production by 66.9% in 2021 – to 1.754 million tons.
Among the main reasons for the reduction of production by Group DF was the loss of control over Severodonetsk Azot (Donetsk region), which managed to produce 0.05 million tons of nitrogen fertilizers until February 27, 2022.
In addition, the production cuts were caused by the destruction of logistics and distribution chains, reduced exports due to regulatory and logistical constraints, power outages due to the mass destruction of energy infrastructure, high gas prices, as well as a drop in solvent demand from farmers by at least 40%.
According to Group DF estimates, the fertilizer market in 2022 decreased by 45-50% – from 4.75 million tons to 2-2.9 million tons.
PKN Orlen has a dominant share in the oil products markets of Poland, the Czech Republic and the Baltic states.
“Before the war Kernel ranked first in the world in sunflower oil production (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 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.
The share prices of all 10 Ukrainian agricultural holdings listed on the Warsaw and London stock exchanges fell in 2022, the fall was from 1.4 times for Ukrproduct to 3.15 times for Kernel.
It follows from the data of the relevant stock exchanges that all Ukrainian agricultural companies have been significantly affected by the Russian military invasion and the negative consequences for the economy of the country caused by it. At the same time, their territorial location did not play a decisive role – the shares of Agroton, whose land bank was occupied by the Russians, fell in price by 1.86 times, while the shares of Milkiland, which did not fall under the occupation, fell by 2.5 times.
According to the exchange, over the period from January 1, 2022 to January 6, 2023, the Ukrainian agricultural companies’ securities fell in price as follows
“Ukrproduct – 1.4 times, to $3.25 (PLN14.3) from $4.5 (PLN19.8).
“Ovostar – 1.52 times, to PLN44.8 from PLN68;
KSG Agro – 1.73 times, to PLN2.21 from PLN3.84;
MHP – 1.81 times, to $3.7 (PLN16.28) from $6.72 (PLN29.7).
“Astarta – 1.83 times, to PLN22.2 from PLN40.55;
“Agroton – 1.86 times, to PLN3.62 from PLN6.76.
“IMC” – 1.92 times, to PLN16.6 from PLN32.
“Milkiland – 2.5 times, to PLN0.9 from PLN2.25;
“Agroliga – 2.66 times, to PLN19.9 from PLN53.
“Kernel – 3.15 times, to PLN18.49 from PLN58.3
Thus, the shares of five of the 10 holdings have fallen in price by 1.73-1.92 times for the year, which allows us to judge roughly the average range of decline in the industry.
