Thursday 12 December 2013

Kernel report Q1 2014

Kernel, contrarian, report, Q1, 2014

First of all. I am very, very sorry. This Q1 report from Kernel came out some time ago and I wrote part of the article, never finished all of it, got a lot of other things coming up in between and never managed to get it published. For that reason I am here very much behind schedule with this report and I must admit that when I was reading the report I was also pretty annoyed but that was honestly not the reason for me forgetting to publish it.

So... the report came out some time ago and on that day the stock directly dropped almost 4%... The question therefore is why? Will something change in the future to improve this? Was the drop justified?

I would say that the drop is justified in this case. What slightly upsets me is that I got the impression from the operating report that they were doing really well due to the increased grain production and sales but that is still such a small part that it is, well not insignificant but, much less important than what I thought it was. That responsibility is completely on my shoulders though and I was obviously too happy about the operating report that I combined with the results from the full year 2013 which made me make an addition of stocks in Kernel in November 2013.

So why did they then drop?

Kernel, segments, report, Q1, 2014

So even though the grain part that I was praising so much before increased significantly (+48%) compared to 2013 it was far, far from covering the poor performance of their decreased bulk sunflower oil (-60%). I was in the previous report also happy about them having increased export over their harbour but considering that it is such a small flow of revenue coming from there I realise that for the future I must adjust my level of happiness according to the level of revenue that the increases actually corresponds to in real numbers.
What do however make me a bit happy is that Kernel seems to have realised that it is a problem to be too dependent on only sunflower oil. They did before have some sugar production but very low and now they have stepped into grain with more strength. They also decided to exchange the boss of that part so obviously they themselves were not happy with the development of the grain part. The reason for the sunflower oil decrease seem to be simply more weather based and not really something to do about. They claim that the harvest was better and that their oil pressing machines were currently running at higher capacity but I trust it when I see it in their Q2 report for what they call 2014 due to their broken year way of reporting.

So I must in this case admit that the drop in share price is fully justified. I also expected a much better result due to the operating report that I had previously taken part of still...

Conclusion: I joined Kernel for the long run and I am neither scared, concerned or worried about these kind of small dips in the share price (I think I am currently down 20% based on my second addition of shares.. otherwise I would have been even a bit lower). For me the fundamentals are still there and when weather and wind has an influence (just as it does for MüRe) sometimes the result is just not as good as one would have hoped. I will stay with my shares but I will also not increase any further until I get to see in the second quarter report what they mentioned should happen.

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