My agricultural holding Kernel arrived with their operating report for the first quarter of 2015 and in my opinion the report was ok. The market did not react towards it and in the shadow of what is going on already in Ukraine those kind of reports matters very little as they also should. It is tragic to follow everything that is happening there. What was in it?
For the previous summary of Kernel please see the Kernel annual report 2014 and for the previous operating report please see Kernel operating report Q4 2014.
It report was only one page so there is not too much to say about it but in comparison to Q1 2014 they have increased Grains, Sunflower, Export as well as Crushing. The most annoying things is that what they have the largest margin on which is the bottled oil hardly increased at all during the quarter. I also find the figures more impressive than what they really are. Q1 2014 was seriously bad so in my eyes I see a flat volumes of Grain, Bottled oil, Export and Crush and the Bulk volumes are down. So what looks very impressive due to the y-o-y is, in the end, not that impressive to me. Still the start of this year was much better than 2014 so hopefully it will continue like that and bring in even larger volumes which will than lead to a good result for 2015 which... as long as they make a profit would then also be an improvement.
I also find it interesting to look at the acres and what they decided to grow on them. They increased Corn a lot and the price has been pretty much flat in the last 3 years. Wheat they decreased slightly and there the price have decreased by around -30% in the last three years. The sunflower they significantly decreased and in the last three years the price have dropped by almost -70% and finally Soybean they increased a little and there the price has increased by around 50% in the last three years. Since I do not keep track of the world production of the different cereals and therefore have also no clue to foresee which will have a price increase during 2015 I can only observe what is being done and hope that the managers in Kernel knows what they are doing especially with the swap of Sunflower to Corn.
Conclusion: The start of year 2015 for Kernel has been much better than 2014 but it is also pretty flat compared to Q2, Q3 and Q4 in 2014. The report once again shows me that Kernel is not influenced by all the horrors that is happening in Ukraine and that they are still doing pretty ok business. I will remain as shareholder and might even consider to increase my holding a bit further.
If you want to find out more about Kernel then please go to analysis of Kernel 2014.
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