Leading Ukrainian sunflower oil producer and exporter Kernel has said its outlook for 2021 was “uninspiring” despite a strong first quarter, AgriCensus reported on 27 November.

The company put its pessimistic forecast down to a drought ruining the Black Sea sunflower seed crop.

Kyiv-based Kernel’s EBITDA for its first quarter of the financial year, which started in July, had tripled compared with the same three-month period in 2019, reaching US$290M due to solid earnings in its oilseed processing unit and trading units, AgriCensus said.

During the first quarter, the oilseed unit had added 39% to an EBITDA of US$31M “on the back of stronger crushing margins driven by growing sunflower oil prices and a record high 2019 sunflower seed harvest in Ukraine,” the company said in a report on 27 November.

Its trading unit tripled EBITDA to US$111M for the quarter driven by “strong performance” in sunflower oil and grains trading by its Swiss-based subsidiary Avere, as well as increased Ukrainian grain exports.

However, despite the solid start to its 2021 financial year Kernel said its 2021 outlook was “uninspiring” as it expected a tight market situation by the end of the current marketing year.

“We plan to process 3.5M tonnes of sunflower seeds, but there are significant downside risks to this target, which may materialise closer to the end of the season due to the relatively weak harvest of sunflower seeds this year in Ukraine,” Kernel said.

“On top of that, concerns come also on the margin side,” it added.

The company said it expected the price of Ukrainian sunflower seed to mirror sunflower oil prices, which could remain high for the rest of the season, with “slow-selling (by) farmers eroding the margin for crushers in the current season”.

“There are significant risks to end up the season with the margin materially below US$100 EBITDA per tonne oil sold observed in FY2020.”

Kernel’s outlook for the infrastructure and grain trading segment remained positive as expectations that Avere would continue to perform well would offset its “grain export business (which) may underperform this season due to lower margins”.