Ukraine's Kernel selling last asset in Russia

Ukrainian agribusiness group Kernel is selling its last Russian asset, a 50% stake in the Taman grain terminal. Swiss commodities trader Glencore, which owns the other half of the terminal, is seen as the most likely buyer, national daily Kommersant reported on Friday.

Kernel's plans to sell its stake in the terminal were revealed by Glencore Agri CEO Chris Mayoney, who was cited by foreign media outlets.

Kernel and Glencore bought the Taman terminal on an equal basis from the Efko Group in 2012 for $265 million. The terminal can handle 3.6 million tonnes of grain per year, and includes an elevator with storage capacity for 80,000 tonnes and potential for expansion to 220,000 tonnes.

The deputy director of strategic marketing at Rusagrotrans, Igor Pavensky said the terminal handled a record 3.38 million tonnes of grain last season, and Kernel's share of this was about 35%. This season, shipments through the terminal are down by 14% year-on-year, with 2.53 million tonnes shipped in July-March, of which Kernel accounted for 39%.

Kernel, one of Ukraine's largest agribusiness groups, produces sunflower oil, grows grain and oil crops, and exports corn, wheat and barley and other products. Annual exports total about 7 million tonnes, according to company data. In addition to the Taman terminal, Kernel operates Transbulkterminal at the Ukrainian port of Illichivsk with capacity to handle 4 million tonnes of grain per year.

The Taman terminal handled more than 10% of Russian grain exports shipped by sea, Rusagrotrans estimates.

The adviser on the sale of Kernel's stake in the terminal is Deutsche Bank, Kommersant said, citing sources.

Grain market experts estimate that Kernel's stake in the terminal is worth anywhere from $70 million to $150 million.

One grain market player said the most obvious buyer for Kernel's stake is Glencore. A spokesman for Glencore declined to comment.

The Taman terminal is Kernel's last asset in Russia. In March 2016, Vedomosti reported that the group was offering to sell oil extraction plants Florentina and Maslo Stavropolya. The Resurs Group, which bought an oil plant in Nevinnomysk from Kernel in 2014 for $10 million, was said to be the potential buyer. Resurs did in fact acquire control of Florentina in May 2016, but Kernel is still listed as the founder of Maslo Stavropolya, according to the Unified State Register of Legal Entities.

Grain market players said that Kernel's plans to completely pull out of Russia became known last year. This decision was made because of problems within the group itself, due to a drop in operating results, as well as the political situation, one of them said.

Kernel's revenue fell 14.6% to $1.9 billion in the 2016 financial year (ended June 30) and EBITDA slumped 12.7% to $346.4 million, but net profit jumped 110% to $225.2 million. The company's grain sales fell 7% to 4.4 million tonnes in the period.

IC UAC according to Interfax-Ukraine.