Friday 19 July 2013

Kernel operation report Q4 2013


An Ukrainian logistics company

Kernel are using a broken year that ends in the end of July each year. The annual report then arrives sometime in August but they still like to give a report concerning the operations of the fourth quarter and it can be found here.

dividends and compound interest is part of the game


The reason why I added a picture of money, actually all the euros that was in my wallet at the moment of taking the picture, was due to a very interesting notification in the report from Kernel. They company which was started up back in 1995 has until today never paid out any dividends. Inside the operation report they announced that it will be suggested on the next shareholders meeting to pay out $0.25 per share. As a shareholder this gives me mixed emotions. On one hand that means that they feel stable enough with their earnings that they can give something back to the shareholders in real cash, which will probably also attract new shareholders that like to get dividends. But... on the other hand this must be interpreted as if the board do not really know how to use the earnings for expanding further and therefore decide to pay dividends with it instead. Very mixed emotions.

Anyway... directly taken from their report which can be found in the link above:

Tons of products sold, crushed and moved

And please observe that it is only the final quarter and not the full year. In this report they do not mention any revenues or earnings so we have to keep our fingers crossed until August. The decrease in crushed sunflower seed comes from bad harvest last year.

If I add up the sales from Q3 2013 then I end up with a total of for the full year 2013 (full year 2012):

Grain - 3.0 M tons (2.1 M tons)
Bulk oil - 1.0 M tons (0.8 M tons)
Bottled sale - 108 tons (132 tons)
Sunflower - 2.3 M tons (2.5 M tons)
Refined oil - 107 tons
Bottled oil - 100 tons
Export - 3.2 M tons (1.8 M tons)


So they have dramatically increased the grain, bulk oil as well as the export in comparison to 2012. However they now have much less oil stored up due to the bad harvest last year and please do not stare yourself blind on the increase of the export because last year that represented only 1.2% of the total revenue.

They have also divested their sugar plant for around $30 M which they did due to two reasons. Firstly for the last two years there have already been an over production of sugar in Ukraine and secondly they have had no where to export the sugar to.

Since I am sitting as a shareholder also in Associated British Foods that have massive sugar production in Europe I know already that that EU has high tariffs on sugar to protect the European farmers (please see here for my previous article). This of course leads to that the sugar production industry benefits also since they can put whatever price they want on the sugar. I guess Kernel expected the European market to be opened up so that they could export from their Ukraine sugar production sites to Europe but lately the news was that for the next couple of years this sugar tariff will not be removed and therefore I find it very good that Kernel decided to divest the business.

Conclusion: Kernel seems to be doing well and I am glad to be a shareholder in the company and I am looking forward to many more interesting years with them with either increased dividends and/or increased expansion.



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