Ukraine’s Kernel Reports Three-Month Loss on Sunflower Oil

Kernel Holding SA reported a net loss of $3.4 million in the third quarter of the Ukrainian company’s fiscal year as most bulk sunflower oil contracts were signed with delivery scheduled for the following quarter.

The Kiev-based company’s loss attributable to shareholders in the quarter ending March 31 compares with a net income of $37.2 million a year earlier, Kernel said in a report published today. The fiscal year ends at the end of June. Kernel reduced its fiscal year-end Ebitda forecast to $310 million from April 18 estimation of “moderately below” $350 million.

“Grain, farming, sugar and sunflower oil crushing volumes would be slightly less than our expectations” causing a cut in full-year Ebitda forecast, Chief Executive Officer Andrey Verevskiy said in a phone call with investors today. Farming showed the weakest performance, he said.

Kernel operates around 400,000 hectares of farm land, Verevskiy said during the conference call today. Ukraine’s grain harvest will probably rise in 2013 to 52 million metric tons from 46 million tons a year earlier, according to the USDA’s May 3 estimate. The country increased sunflower seed planting areas for the 2013 harvest 43.3 percent to 2.85 million hectares as of May 3, statistics data shows.

Kernel shares fell at 17:03 p.m. in Warsaw to 57.4 zloty today from 59.8 zloty on May 29. The stock market was closed yesterday.

‘Turning Point’

“This year was a turning point for Kernel, it was the change in its strategy to focus on grain sale volumes,” said Tamara Levchenko, a Kiev-based agriculture analyst with Dragon Capital, by phone from Kiev today.

Earnings before interest, tax, depreciation and amortization declined 30 percent to $43.8 million in three months ending March 31. Revenue was almost unchanged at $597.9 million.

Less-than-expected results in the quarter ending March 31 and the lower Ebitda forecast was caused by “issues with managing its quickly growing farm division” as the company was buying large land clusters in the past three years, Levchenko said.

Kernel’s bulk sunflower oil sales dropped 22.5 percent to 173,976 tons, while grain sales fell 21.4 percent to 653,745 tons, though that was compensated by higher grain prices.

Higher taxation, smaller margins in the bulk oil and grain segment and an acquisition also contributed to profit decline in the third quarter of fiscal year ending June 30, Kernel said in today’s report. Income tax expenses soared to $5.3 million.

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