Kernel Holdings expect a record year for Ukraine grain exports in
the 2013-14 financial year, despite the group recording a 46% fall in profits
We "expect our grain export volumes to reach a record
4.0–4.5m tonnes in FY2014 versus 3.0m tonnes last year," the
sunflowers-to-silos company, one of Ukraine's biggest agribusinesses, reported.
Total exports from Ukraine are expected to be in the
region of 15-35% stronger in the coming year, with as much as 30m tonnes
available for export according to Kernel as favourable weather is expected to
see a record grain harvest of 58m tonnes.
Ukraine's farm ministry reported grain exports so far in
2013-14 have risen by 13.1% to 7.40m tonnes as of October 14.
'Strong' yields for 2014
While Kernel's farming division reported 'disappointing' results
for the 2012-13 financial year, missing its guidance, the group had a more
optimistic outlook for the current year.
"We are close to completing our FY2014 harvest and crop
yields are up a strong 20–50%."
Despite this Kernel cautioned that, "although our operating
results are strong, our farming is expected to underperform financially this year
due to the sharp decline in grain and oilseed prices that occurred this summer".
Lower than estimated sunflower seed availability, also
had a negative impact, Kernel reported.
"It became apparent that the sunflower seed supply was
even lower than our forecast at the beginning of the season".
Kernel expect to a see a stronger harvest this year despite
"mixed weather conditions, which it hopes will result in "better profitability
and close to full utilization of our crushing plants in the second through
fourth quarters of FY2014 .
"The country should produce a good sunflower seed harvest
this year of 10.0–10.5m tonnes."
Kernel are optimistic for its grain business in the
coming year, particularly given bullish expectations for Ukraine's 2013-4 grain
"We expect FY2014 to be a year of significant volume
growth for our grain supply chain".
Kernel expects the harvest to support grain exports, "which
in turn should support higher grain sales volumes as well as higher throughput
at our grain silo network and export terminals in Ukraine".
The lower marketing margins in the 2012-13 financial were
beneficial to Kernel, the group reported in its full-year results, as smaller "asset-light
players" were forced to release additional volumes for export.
"Silo and export terminal
services' profitability improved compared to the previous year", the group reported. "This is a clear testament to the ability of
our business to offset a shrinking grain export margin with higher throughput
volumes and a larger contribution from our asset base".
In addition the group continued with its programme of
optimizing its landbank, which expanded to 405,000 hectares.
In April, Kernel completed its acquisition of Druzhba
Nova, a farming company that manages 105,900 hectares of a leasehold landbank
in the Poltava, Chernihiv and Sumy
"Druzhba Nova is expected to contribute a solid half of million
tons of crops to our FY2014 results", predicts Kernel.
The group reported a net profit of $111.3m for the year
ending June, compared with earnings of $206.7m a year before, a decline it
attributed weaker than expected performance from its farming division amid historically
low grain marketing profitability.
Shares in the group stood up 0.6% in European trading,
standing at E12.69 per share at the time of writing.