Kernel is beginning a long-term acquisition of ViOil — Concorde Capital

Kernel has started a long-term acquisition of ViOil, the investment analyst at Concorde Capital Andrew Perederey believes.

"We believe Kernel is beginning a long-term acquisition of ViOil, and the key question now is whether the company will pursue both projects (new capacity and the acquisition of existing ones) or will choose the ViOil deal as its priority," Andrew Perederey comments.

Analysts noted that Kernel had two alternative expansion strategies, with the first one being the construction of a crushing plant in western Ukraine with a capacity of 1 mmt, and the second (and more logical) being the acquisition of a seed processor with total capacities of 1.0-1.5 mmt in western Ukraine (i.e. ViOil).

"This is the second acquisition that Kernel has announced this week. The event may have important consequences for Kernel’s expansion strategy in its core segment, sunflower oil," the analyst says.

In mid-2018, the company announced its intention to construct a new plant, meaning that the probability of a ViOil purchase nearly vanished at that time. Moreover, by the end of 1QFY19, Kernel reported that a large part of its USD 152 mln in supplier commitments was related to the crushing plant's construction.

Reference: Kernel Holding S.A. announced the acquisition by one of its subsidiaries a 5.85 pct interest in ViOil Holding Ltd — a holding entity controlling two multiseed oil-extraction plants with an annual crushing capacity of 1.1 million tons of sunflower seeds and a network of silos in Western Ukraine.

The new infographic guide Agribusiness of Ukraine 2017/18 is available by the link.