Business news from Ukraine

“Kernel” ended 1Q2024 with net loss of $30.9 mln

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.

,

IMC Agro Holding posted net loss of $2.25 mln in 9 months

IMC Agricultural Holding posted a net loss of $2.25 million in the first nine months of this year, compared to a net profit of $4.67 million in the same period last year, according to the company’s report on the Warsaw Stock Exchange on Thursday.

According to the report, the holding’s revenue grew by 59.8% to $98.78 million, with exports increasing by 24.4% to $70.23 million.

At the same time, the revaluation of biological assets and agricultural products in January-September this year brought in 44.5% less than in January-September last year – $23.51 million.

In addition, a significant increase in the cost of production – by 55.6% to $92.4 million – led to a decrease in gross profit by 33.3% to $29.89 million.

Although IMC managed to more than halve administrative expenses (to $7.12 million), a more than twofold increase in logistics and distribution costs (to $16.50 million), given the decline in gross profit, led to a drop in operating profit by almost 15.3 times to $1.41 million compared to the same period last year.

At the same time, the situation was partially offset by positive exchange rate differences of $0.79 million in January-September this year, compared to exchange rate losses of $11.07 million in the same period last year.

Normalized EBITDA for the first 9 months amounted to $13.85 million, which is 2.7 times less than in the first 9 months of last year. The report notes that the reason for the decline was the decline in harvest prices this year.

It is specified that the main revenue of IMC in the reporting period was generated by the sale of 472.98 thousand tons of corn – $82.42 million and 56.12 thousand tons of wheat – $10.78 million, but their price fell compared to the previous year, respectively, from $208 per ton to $174 per ton and from $268 per ton to $192 per ton.

Net cash flow from operating activities for 9M2023 amounted to $10.06 million, while for 9M2022 it was negative – $9.37 million.

The volume of investments increased by 79% to $5.80 million, and taking into account less than $2 million of outflows on financial transactions, net cash flow was positive – $2.30 million against a negative result of $11.63 million for 9M2023.

IM’s current liabilities at the end of September amounted to $55.81 million ($55.51 million a year earlier), non-current liabilities – $13294 million ($126.70 million).

The company’s free cash flows at the beginning of October amounted to $27.16 million compared to $24.86 million at the beginning of this year and $13.28 million a year ago.

IMC is an integrated group of companies operating in Sumy, Poltava and Chernihiv regions (north and center of Ukraine). It controls 120.3 thousand hectares (120.0 thousand hectares under cultivation). As of September 30, 2023, the group operated in two segments: crop production and elevators and warehouses.

The agroholding’s net loss in 2022 amounted to $1.1 million against a net profit of $78.7 million a year earlier, with a 37.3% decrease in revenue to $114 million. EBITDA decreased threefold to $36.2 million.

In the first half of 2023, IMC earned $6.28 million in net profit, down 44.6% year-on-year, while its revenue increased by 61.6% to $71.95 million, with exports up 41.2% to $58.9 million. Normalized EBITDA for the first half of the year amounted to $17.06 million, down 41% year-on-year, due to higher sales costs and lower harvest prices.

,

Ukrposhta reduced its net loss by 15%

In January-September 2023, Ukrposhta JSC reduced its net loss by 15% compared to the same period last year – to UAH 594.8 million, according to the company’s report in the information disclosure system of the National Securities and Stock Market Commission (NSSMC).

According to the report, the state-owned company’s net income increased by 12% to UAH 8.36 billion.

The company’s operating expenses increased by 11.4% to UAH 9.3 billion. In particular, material costs increased by 27.9% to UAH 1.1 billion, and labor costs by 11.9% to UAH 4.5 billion. Social contributions increased by 3.8% to UAH 986.6 million. Depreciation and amortization increased by 23.9% to UAH 510.9 million. Other operating expenses increased by 4.6% to UAH 2.2 billion.

Long-term loans from banks increased by 4.3% to UAH 863.11 million in the first nine months of the year. Short-term loans remained unchanged at UAH 3.38 million.

The report also notes that as of September 30, the company violated financial covenants under a loan agreement with the European Bank for Reconstruction and Development (EBRD). It is specified that in September, Ukrposhta received confirmation from the EBRD of the bank’s intention not to charge long-term repayment on the loan and the risk to the company is minimal.

“The EBRD management has confirmed its intention to further cooperate with Ukrposhta in the implementation of projects. Accordingly, the EBRD loan liability was classified as non-current as of September 30, 2023,” the report says.

According to the report, Ukrposhta continues to operate in the context of the military conflict with Russia. As of the reporting date, parts of Donetsk, Luhansk, Kherson, and Zaporizhzhia regions remain occupied, with about 12% of post offices located there. As of September 30, the company has 27.36 thousand points of presence, employing 35 thousand employees (in the first half of the year there were 25.5 thousand points of presence and 45 thousand employees).

The company also reported that it has UAH 3.3 million of C series bonds at par with a maturity date of November 18 this year.

Earlier it was reported that in the first half of the year Ukrposhta increased its net loss by 27.0% compared to the same period last year to UAH 653.7 million. Its net income increased by 20.0% to UAH 5 billion 580.13 million.

,

Ukrposhta increased its net loss by 27%

In January-June 2023, Ukrposhta JSC increased its net loss by 27.0% compared to the same period last year, to UAH 653.7 million.

According to the state-owned company’s report in the NSSMC information disclosure system, its net income increased by 20.0% to UAH 5 billion 580.13 million.

It is noted that in the first half of this year, the Pension Fund remained the only client whose revenues exceeded 10% of Ukrposhta’s total income. The amount of remuneration from it for the delivery of pensions and other social benefits amounted to UAH 1.421 billion against UAH 1.423 billion for the same period last year.

It is specified that revenues from the provision of national postal services increased by 33.2% to UAH 3 billion 2.92 million. In particular, from the delivery of parcels and small packages – by 46.5% to UAH 1 billion 581.85 million, from the distribution of written correspondence – by 3.1% to UAH 667.46 million, from international postal exchange – almost 2.1 times to UAH 456.57 million, while from prepaid registration and delivery of periodicals decreased by 45.1% to UAH 103.7 million.

Financial and related services brought Ukrposhta UAH 2 billion 89.83 million in January-June 2023, only 0.3% more than in January-June 2022, largely due to the stability of the Pension Fund’s remuneration.

At the same time, revenues from postal transfers increased by 75.9% to UAH 130.9 million, while payment acceptance brought in 7.1% less, to UAH 497.37 million.

Finally, sales of own and commission goods increased by 54.6% to UAH 486.62 million.

“Ukrposhta noted that the share of foreign revenues in its revenue increased to 8.2% in the first half of this year from 4.7% in the first half of last year and totaled UAH 456.57 million. In particular, revenues from counterparties in Latvia jumped almost 4.4 times to UAH 228.17 million, in Estonia – 62 times to UAH 56.63 million, in Poland – 2.3 times to UAH 28.4 million, in Germany – 33.8% to UAH 15.48 million.

In the first half of 2023, the company managed to achieve a gross profit of UAH 31.15 million, compared to a gross loss of UAH 32.3 million in the first half of 2022.

However, due to an increase in administrative and sales expenses, the operating loss even slightly increased compared to the same reporting period last year – by 9.8% to UAH 747.04 million.

It is reported that as of June 30, 2023, Ukrposhta’s current liabilities exceeded its current assets by UAH 2.81 billion, while as of December 31, 2022, they exceeded its current assets by UAH 1.97 billion.

The company noted that it continues to operate amid the military conflict with Russia. As of the reporting date, parts of Donetsk, Luhansk, Kherson, and Zaporizhzhia regions remain occupied, with about 12% of post offices located there. Currently, there are almost 25.5 thousand points of presence (45 thousand employees), the report says.

It is noted that Ukrposhta continues to implement major strategic investment projects. In particular, the transition to mobile offices in rural areas has been completed – the project was implemented with the support of the European Bank for Reconstruction and Development. The next step is to automate mobile branches by the end of 2023, which will allow Ukrposhta to fully automate its network.

The company also announced the implementation of the ERP system module, and the transition to a new centralized structure without separate branches is scheduled to be completed in the third quarter of 2023. In addition, other critical back-end and transactional IT systems are being gradually updated to improve the quality of service delivery.

“After a certain pause due to the Russian aggression, Ukrposhta has resumed the project to modernize the logistics network (renting modern logistics centers and installing new sorting equipment). 3 parcel sorting lines have already been launched and full automation of the main sorting hubs covering the entire country is planned for the first quarter of 2024,” the report says.

It is also noted that in 2021, the company entered into a preliminary agreement for the purchase/sale of a controlling stake in one of the private commercial banks to be able to provide banking services in the branch network. “The transaction will take place only if the National Bank of Ukraine authorizes it and other terms of the agreement are fulfilled. As of the date of approval of the financial statements, the company’s management has not received the relevant permits,” Ukrposhta said.

As for the bonds, the company reported that it has UAH 3.3 million of C series bonds at par with maturity on November 18 this year.

,

Interpipe Novomoskovsk Pipe Plant reduced its loss by 9 times

PJSC Interpipe Novomoskovsk Pipe Plant (Interpipe NMPP, Dnipropetrovsk region) has reduced its net loss by 8.8 times in January-March of this year compared to the same period last year – to UAH 13.248 mln.

According to the interim report of the company, the company reduced net income by 37.3% to UAH 251.985 mln during this period.

Retained earnings by the end of March 2023 amounted to UAH 200.795 million.

As reported, “Interpipe NMTZ” ended 2022 with a net loss of UAH 382.038 million, while in the previous year received a net profit of UAH 175.722 million.

“Interpipe is a Ukrainian industrial company, a manufacturer of seamless pipes and railroad wheels. The company’s products are supplied to more than 80 countries through a network of sales offices located in the key markets of the CIS, Middle East, North America and Europe.

The company has five industrial assets: “Interpipe Nizhnedneprovsky Pipe Rolling Plant (NTZ)”, “Interpipe Novomoskovsk Pipe Plant (NMTZ)”, “Interpipe Niko Tube”, “Dnepropetrovsk Vtormet” and Dneprostal electric steelmaking complex under the brand name “Interpipe Steel”.

The ultimate owner of Interpipe Limited is Ukrainian businessman Victor Pinchuk and his family members.

“Interpipe NMTZ” specializes in the production of welded pipes for the oil and gas industry, machine building, construction and other industries.

According to NDU data for the fourth quarter of 2022, Interpipe Limited (Cyprus) owns 90.3897% of the plant’s shares, while Lindsell Enterprises Limited (Cyprus) has 6.2918%.

The authorized capital of PJSC Interpipe NFTZ is UAH 50 mln, the nominal value of a share is UAH 0.25.

, ,

ZZHRK ended 2022 with loss of UAH 372 mln

The temporarily occupied enterprise with foreign investment in the form of Zaporizhzhia Iron Ore Plant (ZZHRK) ended 2022 with a net loss of UAH 371.605 million, while in 2021 it made a net profit of UAH 5 billion 193.310 million.

According to the draft decision of the extraordinary general meeting of shareholders scheduled for September 28, 2023, it is proposed to cover the losses for 2022 at the expense of future periods’ profits.

At the meeting, the shareholders also intend to approve the reports for 2022 and appoint the audit firm KPMG Audit to provide services for the statutory audit of the financial statements of the CJSC “ZZHRK” for 2022.

As reported, an extraordinary shareholders’ meeting held on July 15, 2022, left undistributed net profit for 2021 in the amount of UAH 5 billion 193.310 million. One shareholder was registered to participate in the meeting with a total number of ordinary voting shares of 57430967, or 51.169770% of the voting shares.

The administration of ZZHRK had previously announced that it had lost control over the company’s operations in the temporarily uncontrolled territory of Ukraine. At the same time, it was explained that with the outbreak of active hostilities on the territory of Ukraine, the administration of ZZHRK, in order to comply with industrial safety, implemented a number of measures to temporarily suspend the production process on February 26, 2022, from the day the Russian troops occupied part of the territory of Zaporizhzhia region. And since June 15, 2022, the economic activity and management of production processes at ZZHRK have been impossible due to illegal actions of third parties.

The administration of ZZRK filed a corresponding application with the SBU and law enforcement agencies. It was also noted that information about individuals who cooperate with the occupiers of the aggressor country and assist them in committing illegal actions against the enterprise and its property was transferred to the SBU and other law enforcement agencies to respond to the fact of the seizure of the enterprise and collaboration in accordance with the criminal legislation of Ukraine.

ZZHRK develops the Pivdenno-Belozerskoye and Pereverzevskoye iron ore deposits and produces commercial sinter and open-hearth iron ore. The company sells its products to steelmakers in Slovakia, the Czech Republic, Austria and Poland, as well as to Zaporizhstal in Ukraine.

According to the NDU data for the first quarter of 2023, the main shareholders of the company are the Slovak company Minerfin, a.s. – 51.1698%, Zaporizhstal – 29.5193%, Czech KSK Consulting, a.s. – 19,0632%.

,