Wednesday, January 20, 2016

Kernel annual report 2015


Kernel, annual, 2015, report, front page

Dang it! A big ball dropper on this one! Kernel arrived with not only the annual report but of course also the Q1 report is out so I need to push out all this material. I have subscribed to their email notifications but since I am, obviously, not getting it I must assume it gets stuck in the spam filter. Share price have generally gone down lately with the rest of the market but not more than that so the reports were at least according to expectations.


The report in full can be found here and all material is taken from it. For the previous annual report please see Kernel annual report 2014 and to find out more concerning Kernel please visit analysis of Kernel 2014 (but a fresh analysis will arrive tomorrow with the new data for 2015).

At a first glance the year looked better, which is not so hard to accomplish when last year ended on a negative note and this one on a positive, but still there were also other matters that had improved. Taking a look at the financial statement below then we see that the revenue was flat compared to 2014 and the reason for that is cost control, or maybe better put making sales in USD and having a large workforce being paid in Ukrainian Hryvnia that have dropped like a stone in value. To Kernel this meant that even though world grain prices dropped strongly they still ended up making a profit since the Hryvnia dropped more. This does not impress me much.


Kernel, 2015, financial statement


What is also of significance in the report is that they have managed to decrease their debt and I hope they will manage to take on some new long term debt with better conditions in comparison to what they previously had but then the question appears... what should they do with that money? I would have hoped them to buy up the land that they are leasing today but that is out of my hands.

Conclusion: The annual report looks initially good with 1.34 USD in earnings per share and strongly decreased debt but I consider them to have received this benefit for free and I do not see that they would have had a positive year without the currency drop. I hope that they will managed to take better control of the situation during the coming year because inflation is of course also racing in Ukraine and employees will demand salaries to follow inflation and then some, so costs will catch up with them in the end. In my opinion they should take on some cheap debt right now and start buying up the land that they lease. I will remain as a shareholder but I have concerns regarding the future development. 

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