Fitch Ratings has revised the outlook on Ukrainian commodity processor Kernel Holding S.A.'s Long-Term Foreign-Currency (FC) Issuer Default Rating (IDR) to stable from positive and affirmed the IDR at 'BB-', the rating agency said on its website.

"The rating actions follow the revision of the outlook on Ukraine's sovereign rating (B/Stable). At the same time, the affirmation reflects Fitch's expectations that Kernel will maintain its conservative capital structure after completion of its expansion program in FY22 (ending June 2022). Together with increasing scale, improved product diversification and a record of financial discipline, this points to a strengthening credit profile, which is reflected in the positive outlook on Kernel's Long-Term Local-Currency (LC) IDR," it said.

"Kernel's FC IDR continues to benefit from a two-notch uplift from the Ukrainian Country Ceiling of 'B', due to strong hard-currency debt service ratios," Fitch stated.

"Kernel's IDRs balance its concentration of commodities sourcing in one region and moderate scale against its heavy-asset business structure with vertical integration into commodities sourcing and logistic infrastructure, resulting in stronger profitability than international peers, and its low leverage," according to the document.

"Fitch expects Kernel to post another year of record EBITDA in FY22 of around $620 million. We assume profit growth will be mainly driven by strong results in the trading, infrastructure and farming segments, but also by anticipated profitability recovery in the core oil processing segment following stronger sunflower seed supply in the new season. We expect normalization of profits in trading in FY23-25, which together with a full stabilization of margin in the oil division, should result in sustainable annual EBITDA at around $400 million," the report says.

"Kernel continues to reduce its reliance on a single commodity, sunflower oil, with growing grain-trading operations (primarily corn, wheat and barley). The oilseed processing segment contributed less than 10% to group EBITDA in FY21 due to a material contraction in crushing margin. This was more than compensated by record profits in the trading and farming segments. We estimate that the share of sunflower oil in the group's EBITDA will remain below 35% over FY22-FY24," the agency said.