KERNEL HOLDING S.A.

Société Anonyme 9, rue de Bitbourg L-1273 Luxembourg

R.C.S. Luxembourg B 109173

ANNUAL ACCOUNTS AS AT AND FOR THE YEAR ENDED

30 JUNE 2021

AND REPORT OF THE RÉVISEUR D'ENTREPRISES AGRÉÉ

Table of contents

Report of the board of directors to the shareholders

3-9

Report of the réviseur d'entreprises agréé

10-14

Statement of the Board of Directors' responsibilities for the preparation and approval of

annual accounts

15

Balance sheet

16-17

Profit and loss account

18

Notes to the annual accounts

19-41

KERNEL HOLDING S.A.

9, rue de Bitbourg L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Report of the board of directors to the shareholders' ordinary general meeting deliberating on the approval of the annual accounts to be held on 10 December 2021

Dear Shareholders,

Kernel Holding S.A., (the "Company") was incorporated in Luxembourg on 15 June 2005 as a Société Anonyme ("S.A.") subject to the Luxembourg law for an unlimited period of time. Effective 12 April 2013.

On 8 February 2021, the Company has transferred its registered office to 9 rue de Bitbourg, L-1273 Luxembourg.

The Company is registered with the "Registre de Commerce et des Sociétés" in Luxembourg under the number B 109173.

The subsidiaries of Kernel Holding S.A. (forming together with the Company, the "Group") holds assets primarily in Ukraine and operate across the agricultural value chain.

The Group operates in farming, grain origination, storage, transport and marketing, and in the production, refining, bottling and marketing of sunflower oil.

The Group's goal is the continuous development of profitable and sustainable business that enhances its position a leader in the field of low-cost production, sourcing, processing and handling of agricultural commodities, bridging the resource-rich Black Sea region with large international consumer markets.

In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.

We confirm that to the best of our knowledge and belief:

  • The consolidated financial statements of Kernel Holding S.A. presented in this Annual Report and established in conformity with International Financial Reporting Standards as adopted by the European Union give a true and fair view of the consolidated statements of comprehensive income, changes in equity and cash flows for the year then ended, and notes to the consolidated financial statements, including a summary of significant accounting policies; and
  • The Board of Directors Report includes a fair review of the development and performance of the business and position of the Company and the undertakings included within the consolidation taken as a whole, together with a description of the principal risks and uncertainties it faces.

Overview

Kernel Holdings S.A. being a holding company with no operational activity, the overview below is mainly done from the Group perspective, taking into account the performance of Kernel Holding S.A. as well as its subsidiaries.

During the year ended 30 June 2021, the Group generated USD 928,667 thousand EBITDA (up by 2,1x y-o-y) and USD 512,708 thousand net profit attributable to shareholders of Kernel Holding S.A. (up by 4.3x y-o-y).

Annual accounts for the year ended

30 June 2021

3

KERNEL HOLDING S.A.

9, rue de Bitbourg L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Report of the board of directors to the shareholders' ordinary general meeting deliberating on the approval of the annual accounts to be held on 10 December 2021

Acquisitions/ disposals

During the year ended 30 June 2021, the Etrecom Investments Limited issued and allotted additional ordinary shares.

In fact, the increase

in authorized capital of Etrecom

Investments Limited was conducted in two stages:

4th August 2020 by

42,640,287 fully paid ordinary

shares totaling EUR 42,640,287.00 (equivalent to

USD 50,000,000.00) and 25th September 2020 by 51,018,000 fully paid ordinary shares totaling EUR 51,018,000.00 (equivalent to USD 60,000,000.00). The payments of shares in full were settled in cash in several tranches.

On 30 September 2020, the Company sold 12.5 % participation holding in Avere Commodities S.A. for an amount of CHF 12,500.00 (equivalent to USD 12,621.75).

During the year ended 30 June 2021, the Company increased value of its participation interest through additional financial contributions to the authorized capital of the following companies:

  • Prydniprovskyi Oliinoekstraktiinyi LLC for an amount of UAH 1,120,000,000.00 (equivalent to USD 37,000,000.00) in accordance with the agreement dated 17 April 2020;
  • Transgrainterminal LLC for an amount of UAH 405,377,916.67 (equivalent to USD 13,065,000.00) in accordance with the agreement dated 5 May 2020;
  • Agro Logistics Ukraine LLC for an amount of UAH 140,110,000.00 (equivalent to USD 5,000,000.00) in accordance with the agreement dated 20 August 2020.

As at 30 June 2021, considering the financial situation of some subsidiaries, the management decided to record the following impairments and reversals of value adjustment:

  • USD 46,887,444.32 in relation to its participation held in Etrecom Investments Limited reducing the net book value of investment from USD 273,901,524.95 to USD 227,014,080.63.
  • USD 193,221.27 in relation to its participation held in Cherkaskyi, Public Joint Stock Company reducing the net book value of investment from USD 680,010.69 to USD 486,789.42.
  • USD 2,745,087.17 in relation to its participation held in Transgrainterminal Investments reducing the net book value of investment from USD 13,065,000.00 to USD 10,319,912.83.
  • USD 31.72 in relation to its participation held in Transbulkterminal LLC reducing the net book value of investment from USD 49.00 to USD 17.28.
  • USD 120,278.40 in relation to its participation held in Bilovodskyi Kombinat Khliboprodyktiv reducing the net book value of investment from USD 4,029,326.40 to USD 3,909,048.00.
  • USD 73,077.39 in relation to its participation held in Avere Commodities has been reversed considering the net assets of the subsidiary and abovementioned disposal.

The Company performed impairment testing of investment in Kernel Trade LLC considering its direct and indirect ownership. Accordingly, the calculation of net asset value of Kernel Trade LLC exceeded its net balance value as of 30 June 2021, so no impairment indication was identified.

Annual accounts for the year ended

30 June 2021

4

KERNEL HOLDING S.A.

9, rue de Bitbourg L-1273 Luxembourg

R.C.S. Luxembourg B 109173

Report of the board of directors to the shareholders' ordinary general meeting deliberating on the approval of the annual accounts to be held on 10 December 2021

1. Income statement highlights

The Group generated USD 5,647 million revenue in FY2021, up 38% y-o-y driven by high grain and sunflower oil prices (albeit lower physical export volumes from Ukraine) and active physical sales of soft commodities originated from 3rd-parties by our Avere subsidiary.

We recognized a USD 133 million gain from net change in fair value of biological as-sets and agricultural produce in FY2021, compared to a USD 21 million loss a year ago. This component included a gain from revaluing crops in fields to fair value less costs to sell as of 30 June 2021 and expensing the respective gain booked a year earlier, as well as a loss from change in the fair value of livestock. The recognized gain results from higher grain and oilseeds prices expected for FY2022 produce than those expected for FY2021 harvest.

Costs of sales in FY2021 increased by 34% y-o-y, to USD 4,877 million, driven by growing cost of goods for resale and raw materials used. We also managed to reduce payroll costs and other operating costs. Additionally, rental payments are disappearing from our in-come statement following the introduction of IFRS 16 standard1. Consequently, gross profit for the period doubled y-o-y, totaling at USD 903 million.

Other operating income settled at USD 95 million, comprising primarily gains on con-tractswash-out and stock-take, related mostly to Avere trading operations.

General and administrative expenses in FY2021 added 47% y-o-y, to USD 186 million, solely driven by payroll and payroll related costs increase, with higher annual performance bonus accrual for employees and management being the major growth factor. Consequently, operating profit increased 2.4x y-o-y, to USD 812 million.

Finance costs in FY2021 reduced 4% y-o-y, to USD 142 million, including USD 95 million interest expenses on bonds issued and bank loans, USD 45 million interest on rent arising as a result of IFRS 16 introduction, and USD 2 million other finance costs, net.

Group also recognized a USD 6 million foreign exchange loss. This item is mostly a non-cash gain recognized after the revaluation of our intra-group balances denominated in Ukrainian hryvnia following its depreciation against USD over the reporting period.

Other income, net, amounted to USD 11 million, mostly driven by USD 16 million gain on derivatives sales related to capturing arbitrage opportunities on FX market as a part of our liquidity management exercises. Corporate income tax expenses in FY2021 added 46% y-o-y, to USD 32 million, reflecting higher taxable profits achieved during the season.

As a result, net profit for 12 months ended 30 June 2021 totaled at USD 643 million, a 5.2x bigger than in the previous year and being more than Group generated in total over 4 previous years FY2017-FY2020. Net profit attributable to shareholders of Kernel Holding S.A. ended up at USD 513 million.

Distributing FY2020 profits, the Company paid a USD 35 million dividend in January 2021, increasing it by 70% from the level paid over six previous years. Based on the FY2021 results and considering also the final portion of our greenfield CapEx, the bond principal repayment, and potential additional share buybacks in FY2022, the Board of Directors recommends the general meeting of shareholders to approve the dividend of USD 0.44 per share, implying USD 35.6 million in total.

Annual accounts for the year ended

30 June 2021

5

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Kernel Holding SA published this content on 03 October 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 03 October 2021 21:18:16 UTC.