Effect which appears due to vertical integration and segment interconnection
Farming EBIT falls for 1% due to unexpected event
Handling and transhipment EBIT falls for 1% due to unexpected event
Wholesales of grain EBIT falls for -0,15% (because of decrease in the number of intersegment sales)
Wholesales of grain EBIT growth for 1,5% for in the next quarter
Negligible effect on Oil segment's EBIT
Wholesale of grain segment EBIT falls for 1,7% (because of decrease in the number of intersegment sales)
Oil segment EBIT rise for 0,02%
Handling and transshipment EBIT growth for 0,38%
Variance of ebit margin of different segments explained by ebit margin from other segments
Source: Bloomberg, KNU estimates
Appendix 9. Kernel`s Structure
Figure 52. Simplified Structure of Holding
Source: Company data
Appendix 10. Kernel`s Value-Added Process
Figure 53. Kernel`s Value Chain Model, 2012
Segment |
Product activity |
Share of total assets |
Capacity& output |
Share of revenue Total revenue*= USD 2,157.4m |
EBITDA, m USD (share of total EBITDA) Total EBITDA= USD 322m |
||||||||
Farming |
Agricultural farming. Production of wheat, barley, corn, soya bean, sunflower seed and sugar beet |
|
Acreage under crops:248,562 ha Output: 459,000 tons of grain, 139,000 tons of oilseed and 526,000 tons of sugar beet % of land cultivated, harvest FY2012
|
Intersegment sales=84.9% |
67.62 (21%) |
||||||||
Sunflower oil in bulk |
Production and sales of sunflower oil in bulk (crude and refined) and meal |
|
Sunflower oilseed crushing: 3,000 kt Sunflower seed crush:2,493 kt Sales:828,370 tons
|
|
152.68 (47.4%) |
||||||||
Bottled sunflower oil |
Production, refining, bottling, marketing and distribution of bottled sunflower oil |
|
Capacity;173 000 litres Sales:134,000 litres 3 brands + private label
|
|
29.30 (9.1%) |
||||||||
Grain |
Sourcing and merchandising of wholesale grain |
|
Sales= 2,123,229 tons |
|
24.79 (7.7%) |
||||||||
Export terminals |
Grain handling and transshipment services in the ports |
5.5% |
Grain and edible oil export terminals capacity= 6.0 mmt |
Intersegment sales=72.3% |
12.56 (3.9%) |
||||||||
Silo services |
Provision of grain cleaning, drying and storage services. |
|
Silo storage capacity=2,500 kt Grains and oilseeds received in inland silos=2,059 kt
|
Intersegment sales=38.7% |
16.74 (5.2%) |
||||||||
Sugar |
Production, marketing and distribution of sugar |
|
Capacity to process 7,957 Ths tons of sugar beet Output= 119,600 tons |
|
18.35 (5.7%) |
17.8%
45%
5.6%
11.4%
7.6%
6.8%
*During the year ended 30 June 2012, export sales amounted to 85% of total external sales revenue.
Source: Company data, KNU estimates
Appendix 11. Cost of equity
Figure 54. Calculation of COE
Cost of equity is includes the following items:
Based on 10 years US government bonds risk-free rate of 1.7%
Equity risk premium, calculated using supply-side model with income return of 3.3% (10-year US Treasury notes interest) and supply of equity return of 2.2% (average annual P/E growth of S&P index)
Unlevered beta of 0.65 for the companies which operate in agricultural sector.
Size risk premium of 1.56% as a yield premium of S&P MiddleSmallCap over S&P 500 for the previous year
Country risk premium using yield on Ukrainian dollar-denominated bonds, equal to 5.9%
Currency risk premium based on the IMF forecasts of the inflation rates of US and Ukraine.
Source: Bloomberg, IMF, S&P, KNU estimates
Appendix 12. Agricultural production
Figure 55. Ukrainian and Russian agricultural output
Commodity |
Million USD |
MMT |
Market share in 2010, % |
||||
2009 |
2010 |
2010 |
|||||
UA |
UA |
UA |
RU |
Europe |
UA |
RU |
|
1 |
2 |
3 |
4 |
5 |
6 |
7=4/6*100% |
8=5/6*100% |
Maize |
1320.4 |
699.4 |
12.0 |
3.1 |
85.1 |
14.1% |
3.6% |
Wheat |
2546.0 |
1806.8 |
16.9 |
41.5 |
203.7 |
8.3% |
20.4% |
Soybeans |
217.5 |
187.0 |
1.7 |
1.2 |
4.8 |
35.4% |
25.0% |
Sugar beet |
306.0 |
371.0 |
13.7 |
22.2 |
150.5 |
9.1% |
14.8% |
Barley |
792.2 |
394.4 |
8.5 |
8.4 |
73.5 |
11.6% |
11.4% |
Sunflower seed |
1704.7 |
1816.8 |
6.8 |
5.3 |
19.8 |
34.3% |
26.8% |
Rapeseed |
497.5 |
351.4 |
1.5 |
0.7 |
23.1 |
6.5% |
3.0% |
Total |
7384.3 |
5626.8 |
61.1 |
82.4 |
560.5 |
Х |
Х |
Source: FAO, KNU estimates
Appendix 13. Positions of Kernel`s business segments
Figure 56. BCG-matrix for Ukrainian agricultural market
-
Market
Market Growth
Relative Market Share
R, %
1
Maize
0.53
3.87
12.4
2
Wheat
0.71
0.41
32.1
3
Soybeans
0.86
1.42
3.3
4
Sugar beet
1.21
0.62
6.6
5
Barley
0.50
1.01
7.0
6
Sunflower seed
1.07
1.28
32.3
7
Rapeseed
0.71
2.14
6.2
Source: KNU estimates
Appendix 14. Market forces
Figure 57. Porter five forces analysis for Ukrainian agriculture
Force |
Weight |
Oil market |
Grain market |
Threat of new competition |
X |
3.9 |
3.7 |
Existence of entry barriers |
1/9 |
4 |
4 |
Economies of product differences |
1/9 |
3 |
3 |
Brand equity |
1/9 |
5 |
4 |
Capital requirements for new players |
1/9 |
5 |
5 |
Access to distribution |
1/9 |
4 |
4 |
Customer loyalty to established brands |
1/9 |
4 |
3 |
Advantages of prime cost |
1/9 |
4 |
3 |
Industry profitability |
1/9 |
4 |
4 |
Governmental or regulatory reaction to new players |
1/9 |
2 |
3 |
Threat of substitute products |
X |
3.7 |
2.3 |
Buyer propensity to subsitute |
1/6 |
4 |
2 |
Relative price performance of substitute |
1/6 |
4 |
3 |
Buyer switching costs |
1/6 |
2 |
2 |
Perceived level of product differentiation |
1/6 |
5 |
2 |
Number of substitute products available in the market |
1/6 |
4 |
2 |
Quality depreciation |
1/6 |
3 |
3 |
Bargaining power of suppliers |
X |
2.3 |
2.4 |
Supplier switching costs relative to firm switching costs |
1/8 |
2 |
2 |
Differentiation degree of inputs |
1/8 |
3 |
3 |
Impact of inputs on cost |
1/8 |
4 |
4 |
Presence of substitute inputs |
1/8 |
2 |
3 |
Strength of distribution channel |
1/8 |
3 |
3 |
Supplier concentration to firm concentration ratio |
1/8 |
2 |
2 |
Employee solidarity |
1/8 |
2 |
2 |
Quantity of suppliers |
1/8 |
5 |
5 |
Bargaining power of buyers |
X |
3.1 |
2.5 |
Buyer concentration to firm concentration ratio |
1/8 |
2 |
2 |
Degree of dependency upon existing distribution channels |
1/8 |
4 |
4 |
Bargaining leverage |
1/8 |
3 |
2 |
Buyer switching costs relative to firm switching costs |
1/8 |
2 |
2 |
Information availability for buyers |
1/8 |
3 |
3 |
Buyer price sensitivity |
1/8 |
4 |
2 |
Uniqueness of industry products |
1/8 |
2 |
2 |
Quantity of buyers |
1/8 |
5 |
3 |
Intensity of competitive rivalry |
X |
3.6 |
3.5 |
Sustainable competitive advantage through innovation |
1/8 |
4 |
3 |
Level of advertising expense |
1/8 |
5 |
2 |
Flexibility through customization, volume and variety |
1/8 |
3 |
3 |
Market saturation |
1/8 |
5 |
5 |
Market growth rate |
1/8 |
1 |
2 |
First party ambitions |
1/8 |
4 |
4 |
Ambitions of rival shareholders |
1/8 |
4 |
5 |
Quantity of competitors |
1/8 |
3 |
4 |
Source: KNU estimates
Appendix 15. Technical Analysis
Figure 58. Technical Analysis Forecast
The signal for impulse wave formation is passing 76 PLN resistance level
The signal for correction wave formation is passing 51 PLN support level
Resistance level (76 PLN)
Support level (51 PLN)
Source: KNU estimates