KERNEL HOLDING S.A.

Kernel Holding S.A.

ANNUAL REPORT

For the year ended 30 June 2024

rnel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Kernel is a diversified, vertically

integrated agricultural business,

the largest exporter of agricultural

products from Ukraine.

We are the world’s leading producer and exporter of sunflower oil,

the largest grain exporter from Ukraine, the operator of an exten-

sive agricultural logistics network, and the leading producer of grain

and oilseeds in Ukraine. In FY2024, we supplied 8 million tons of

agricultural products from Ukraine worldwide.

73-81

Corporate Governance

82-144

Financial Statements

Independent Auditor’s Report

Statement of Management Responsibilities

Selected Financial Data

Consolidated Statement of Financial Position

Consolidated Statement of Profit or Loss

Consolidated Statement of Profit or Loss and

Other Comprehensive Income

Consolidated Statement of Changes in Equity

Consolidated Statement of Cash Flows

Notes to the Consolidated Financial Statements

144

Corporate Information

1-38

Management Report

Key Highlights

Chairman’s Statement

Our Business Model

Kernel at Glance

Financial Performance in FY2024

Segment Performance

Oilseed Processing

Infrastructure and Trading

Farming

Risk Management

Alternative Performance Measures

39-72

Sustainability Report

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Key Highlights

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

USD million except ratios and EPS

FY2023

FY2024

y-o-y

Income statement highlights

Revenue

3,455

3,581

EBITDA

544

381

(30%)

Net profit / (loss) attributable to equity holders of Kernel Holding S.A.

299

168

(44%)

EBITDA margin

15.8%

10.6%

(5.1pp)

Net margin

8.7%

4.7%

(4.0pp)

EPS, USD

3.86

0.65

(83%)

Cash flow highlights

Operating profit before working capital changes

753

604

(20%)

Change in working capital

128

(21)

n/a

Finance costs paid

(120)

(78)

(35%)

Income tax paid

(44)

(32)

(26%)

Net cash provided by / (used in) operating activities

716

472

(34%)

Net cash used in investing activities

(113)

n/a

Liquidity and credit metrics

Net interest-bearing debt

595

281

(53%)

Readily marketable inventories

282

247

(12%)

Adjusted net debt

313

(89%)

Shareholders' equity

1,742

1,865

Net debt / EBITDA

1.1x

0.7x

(0.4x)

Adjusted net debt

/ EBITDA

0.6x

0.1x

(0.5x)

EBITDA / Interest

4.4x

5.5x

1.1x

Non-financial highlights

Number of employees (full-time equivalent) as of 30 June

10,733

10,904

Rate of recordable work-related injuries, accidents per million worked hours

0.50

0.81

62%

Social spending, USD million

12.3

25.1

2.0x

Total GHG emission, thousand tons of CO

equivalent

280

195

(30%)

Total energy consumption, thousand gigajoules

7,721

8,689

14%

Note:

The financial year ends on 30 June.

Hereinafter, EBITDA is calculated as a sum of the profit from operating activities plus amortization and depreciation.

Commodity inventories are inventories such as corn, wheat, sunflower oil, and other products that were easily convertible into cash before the Russian invasion of

Ukraine given their commodity characteristics, widely available markets, and the international pricing mechanism. The Group used to call such inventories “Readily

marketable inventories”, but after the beginning of the war in Ukraine the Group faced difficulties selling such inventories, and therefore such inventories cannot

any

longer be considered readily marketable.

Adjusted debt is the sum of short-term interest-bearing debt, current maturities of long-term interest-bearing debt, long-term interest-bearing debt and lease liabili-

ties, less cash and cash equivalents, and commodity inventories at cost.

Excluding employees related to assets held for sale as of the reporting date.

Hereinafter differences between totals and sums of the parts are possible due to rounding.

Hereinafter “Kernel”

or “Group” refers to the Kernel Holding S.A. group of companies, while “the Company” refers to Kernel Holding S.A. as the Group’s parent entity.

This Strategic Report

together with the “Sustainability” and “Corporate Governance” sections shall be read and perceived as Directors’ Report for the purposes of the

Luxembourg legislation.

……………………………………………………………………

Net debt / EBITDA

……………………………………………………………………

EBITDA

USD million

2.2x

1.0x

6.8x

1.1x

0.7x

FY2020 FY2021 FY2022 FY2023 FY2024

……………………………………………………………………

Net cash generated by operating activities

USD million

443

806

220

544

381

FY2020 FY2021 FY2022 FY2023 FY2024

269

460

(305)

716

472

FY2020 FY2021 FY2022 FY2023 FY2024

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Chairman’s Statement

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Andrii Verevskyi

Chairman of the Board of Directors,

Founder

Dear Stakeholders,

Reflecting on the fiscal year ending 30 June

2024, a year profoundly impacted by Russia's

ongoing invasion of Ukraine, I am pleased to

present the Kernel Holding S.A. annual report

on behalf of the Board of Directors. This report

provides an overview of the Group’s financial

results, operational achievements, and our

strategic direction as we look ahead to

FY2025 and beyond.

FY2024 highlights

The operating environment in FY2024 was

marked by extreme volatility and elevated

risks. The year began with the full blockade of

our primary export route – Ukrainian deep-wa-

ter Black Sea ports – after Russia's unilateral

termination of the Black Sea Grain Initiative on

18 July 2023. Right after that, Russia esca-

lated its attacks, launching frequent drone and

missile strikes on Ukraine's port infrastructure.

These strikes severely damaged our export

terminal at Chornomorsk, reducing its trans-

shipment capacity from 10 to 8 million tons per

annum, and further damaging our transship-

ment assets along the Danube River.

As a result of these disruptions, our export vol-

umes dropped significantly in Q1 FY2024,

leading to reported losses for that period.

Signs of improvement emerged only in late

September 2023 after the Ukrainian Navy es-

tablished a temporary corridor for vessels de-

parting from Black Sea ports. By mid-October,

vessels began actively using this new route,

seeking to bypass the Russian blockade and

revive sea-borne grain exports. The corridor

proved effective, and from Q2 FY2024, we

managed to significantly increase export vol-

umes and resume operations closer to normal

levels – though still nearly 50% below pre-war

quarterly grain export peaks. It also resulted in

the reduction of our carry-over stocks through

FY2024 from 1.3 million tons of vegetable oil,

meal, grain, and oilseeds at the beginning of

the season to 0.8 million tons by the end. How-

ever, war-related risks remain, with periodic

Russian strikes on port infrastructure, railway

logistics, and civilian vessels continuing to

pose significant threats, endangering and

making sea-borne logistics costly or even

leading to a complete shutdown of export

routes.

Export disruptions were not the only chal-

lenges we faced due to the war. Russia tar-

geted our inland assets, including silos and

crushing plants, as well as Ukraine’s key infra-

structure like port railway networks and civilian

vessels, and power generation and distribution

systems. As the war dragged on, the conscrip-

tion intensified. As of the date of this report,

779 of our colleagues are bravely serving in

the Ukrainian military forces, defending our

nation against Russian aggression. We stand

with them and their families, offering support

and contributing to various military initiatives.

Additionally, we are committed to aiding recov-

ery efforts in areas impacted by Russian at-

tacks, with our total social spending in FY2024

reaching USD 25 million. Yet, these efforts are

small in comparison to the immense suffering

endured by countless Ukrainians. Our hearts

are heavy for the 56 Kernel employees who

have lost their lives – both as soldiers and ci-

vilians. Their memories are honored on a ded-

icated webpage. The loss of each life leaves

an irreplaceable void, and it is heartbreaking

to speak of such tragedies in the 21st century.

We must ensure that their sacrifices are never

forgotten. We also pray for 20 our employees

who are listed as missing and keep in our

thoughts the 114 employees who have sus-

tained injuries. The physical and emotional

scars they bear are a stark reminder of the bru-

tal realities of war. For these individuals and all

war veterans, we have implemented special

work conditions, launched adaptation pro-

grams, and provided various forms of support

to help them through their recovery.

Describing the financial performance, the

Group's EBITDA in FY2024 fell 30% y-o-y to

USD 381 million, primarily due to a USD 229

million impairment on oilseed processing

plants, port facilities, and other assets, reflect-

ing expected future performance decline and

increased risks. After adjusting for this, the un-

derlying performance remained relatively sta-

ble: margins were lower due to weak grain and

vegetable oil prices, but this was partially off-

set by higher sales volumes, thanks to our re-

cent investments in export infrastructure. Net

profit attributable to shareholders decreased

by 44% y-o-y, to USD 168 million. Additionally,

foreign exchange translation losses of USD 97

million, driven by the depreciation of the

Ukrainian hryvnia against the US dollar,

brought total comprehensive income attributa-

ble to the Company’s shareholders to USD 63

million, up 7% y-o-y.

Contributions by various business segments

were as follows.

The Oilseed Processing segment delivered

USD 83 million in EBITDA in FY2024, a 69%

y-o-y decline, largely impacted by a USD 172

million impairment loss. Besides, the segment

benefited from receiving a USD 27 million in-

surance payment for property damage and

business interruption. Excluding these one-off

factors, the segment's core performance re-

mained robust. A strong sunflower seed sup-

ply, supported by a high harvest of 14.6 million

tons, underpinned Kernel's 24% y-o-y growth

in crushing volumes, reaching 3.2 million tons.

This expansion was bolstered by the commis-

sioning of Ukraine’s largest oilseed processing

plant in February 2024, which processed 231

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Chairman’s Statement continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

thousand tons of oilseeds – a project that has

been in development since 2018. The in-

creased crushing volumes drove a 30% rise in

vegetable oil sales, totaling 1.5 million tons.

Our diversified export routes, including access

to the Danube River and reopened Black Sea

ports, combined with our 2022-2023 invest-

ments to diversify transshipment options, ena-

bled us to sustain export activities effectively.

Kernel maintained its leadership as Ukraine’s

largest sunflower oil producer and exporter,

securing 22% of Ukraine's sunflower oil ex-

ports and 9% of global exports. Additionally,

our renewable energy investments, including

a new 20 MW co-generation heat and power

facility launched in December 2023, also paid

off: the biomass-powered operations gener-

ated USD 24 million in EBITDA by selling

green energy to the grid, enhancing energy re-

silience amid potential power shortages.

Despite these positive developments in vol-

ume growth and business expansion, crushing

margins narrowed during FY2024, mainly due

to persistently low global sunflower oil prices

throughout the season.

The Infrastructure and Trading segment

achieved USD 204 million in EBITDA in

FY2024, up 33% y-o-y, which includes a USD

53 million contribution from Avere’s global

trading operations and a USD 45 million one-

off loss from asset impairments. Adjusting for

this and other one-offs, operations in Ukraine

delivered USD 191 million EBITDA, up 56% y-

o-y. The growth in EBITDA was primarily

driven by increased volumes, with grain ex-

port and terminal throughput rising by half as

compared to FY2023. Exporting 5.5 million

tons of grain and oilseeds from Ukraine, we re-

tained our position as a market leader, captur-

ing a 10% share of Ukrainian exports and sig-

nificantly reducing inventory levels throughout

the year. This volume growth was further sup-

ported by recent capital investments in ex-

port infrastructure. The previously idle vegeta-

ble oil export terminal in the port of Chorno-

morsk, acquired at the start of FY2024, was

fully revitalized, and transshipment operations

began there in January 2024. This terminal is

now evolving into a key hub for vegetable oil

transshipment, capable of handling all the sun-

flower oil produced by our facilities, while also

offering services to third parties and facilitating

our purchases of sunflower oil from external

sources. Additionally, we further invested in al-

ternative export routes via the acquisition ac-

quiring vegetable oil transshipment capabili-

ties in the port of Reni and maintained opera-

tions in the Pivdennyi port. Finally, our ac-

quired fleet of vessels fully contributed to our

earnings in FY2024.

While contributions from our Ukrainian opera-

tions increased, the results were highly

volatile. The first quarter saw weak perfor-

mance due to the closure of the Black Sea for

exports, highlighting the lack of viable alterna-

tives to sustain profitable operations. Condi-

tions began to improve in Q2 as exports re-

sumed and showed a strong recovery toward

the end of the season. A key factor was stable

export routes in Q2-Q4 FY2024, as a new ex-

port corridor established by the Ukrainian

Navy appeared to be much more efficient than

the Black Sea Grain Initiative in FY2023. De-

spite the damage inflicted on our terminal in

Chornomorsk early in the season, we man-

aged to transship 6 million tons of goods there

– a 50% increase y-o-y.

Finally, a strong 2023 grain harvest in

Ukraine, combined with substantial carry-over

stocks from the previous season, ensured a

solid domestic grain supply in FY2024, sup-

porting both volumes and margins.

Our Farming segment delivered USD 171 mil-

lion in EBITDA, a 23% y-o-y decline. This re-

sult comprises USD 85 million EBITDA from

the sale of the 2023 crop, USD 82 million –

from the sale of carry-over stocks from the

2022 crop, and USD 5 million contribution from

other factors. While we benefited from strong

crop yields and lower production costs, sales

prices were significantly lower than in FY2023.

The financial outcome was largely driven by

high sales volumes and material inventory re-

duction.

Our strategic adjustments to the crop mix, in-

cluding increased acreage for soybeans and

rapeseeds and a reduced focus on corn,

proved effective, as oilseeds farming was no-

tably profitable in FY2024. On the other hand,

storage capacity limitations in the previous

season, driven by export logistics constraints,

led to quality deterioration and subsequent

losses of nearly 30 thousand tons of grain due

to improper storage conditions.

Operating performance in FY2024 allowed us

to de-lever the Group. In December 2023, fol-

lowing three debt restructuring processes

since the onset of Russia’s full-scale invasion,

we repaid over USD 600 million in PXF and

bilateral credit lines. This decision was driven

by an improved export logistics environment,

a stabilized business outlook, and a solid li-

quidity position. After this, our loan portfolio

consisted of long-term facilities from EIB and

EBRD (USD 164 million as of 30 June 2024),

Eurobonds totaling USD 600 million, and USD

159 million in financing from local and interna-

tional banks. The net-debt-to-EBITDA ratio as

of 30 June 2024 was at a comfortable 0.7x

level.

Following the reporting period, despite chal-

lenges posed by restrictive capital controls in

Ukraine due to the ongoing war and uncertain-

ties about future operations, we successfully

repaid the USD 300 million Eurobonds at ma-

turity on 17 October 2024. This achievement

underscores our commitment to maintaining a

strong credit history, positioning us as one of

Ukraine’s most reliable borrowers. Addition-

ally, we secured the first-ever financing pro-

vided by international lenders since the begin-

ning of the full-scale war in Ukraine – a sun-

flower oil pre-export financing facility for the to-

tal amount of USD 150 million.

In light of the significant uncertainties and risks

to the Group's future, the Board of Directors

recommended shareholders not distribute div-

idends for the financial year ending 30 June

2024.

FY2025 outlook

The new season, like the three preceding

ones, will be substantially shaped by geopoli-

tics and war-related risks, with significant im-

plications for Kernel:

• Our business remains heavily dependent

on the Black Sea as the main export chan-

nel. Any disruptions to this route could se-

verely impact our operations, as we experi-

enced during some periods of FY2022-

2024. While we have developed alternative

export options, they are not sufficient sub-

stitutes should this risk materialize.

• The threat of damage to our key assets is

significant and has already materialized in

the past. Our port facilities suffered damage

in the summer and autumn of 2023 and still

remain under repair. Additionally, in August

2024, our largest oil extraction plant was hit

by a Russian drone attack. The crushing

plant in Vovchansk was wiped off the face

of the earth as a result of Russia's offensive

in the northern Kharkiv region, and our facil-

ity in Prykolotne sustained heavy bombing

damage. With the ongoing intensification of

Russian attacks on Ukraine’s civil infrastruc-

ture and no insurance coverage available,

this remains one of the most critical risks we

face in FY2025.

• The protracted war in Ukraine has in-

creased risks related to human capital, as

ongoing conscription draws more men into

military service. Although we have managed

to adjust our operations to this challenge so

far, the situation could deteriorate. Addition-

ally, there is a potential for increased tax

obligations if the Ukrainian government

faces difficulties funding escalating war ex-

penses, adding to the already high taxes

and social donations we make.

• The threat of power outages looms large,

especially in light of intensified Russian at-

tacks on Ukraine’s energy infrastructure.

Although we have prepared most of our fa-

cilities to manage such scenarios, a severe

power shortage could lead to rising costs

and, in the worst case, substantially disrupt

our operations.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Chairman’s Statement continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Another challenge in FY2025, not existing in

two previous seasons will be significant crop

supply constraints in Ukraine due to a

smaller harvest and limited carry-over stocks.

A summer heatwave has severely affected the

yield potential for both sunflower and corn, two

of our most critical crops:

• The sunflower harvest is projected to de-

cline by 17% y-o-y, decreasing by 2.5 mil-

lion tons to 12.1 million tons. This decline

results not only from lower yields but also

from a reduction in sunflower acreage to

more sustainable levels, aligning with our

previous year's guidance. This reduction

comes at a time when crushing capacity is

set to reach a record 20 million tons per an-

num for FY2025, leading to an unprece-

dented gap of 8 million tons between crush-

ing capacity and the available sunflower

harvest. The gap will be even more severe

than the last major deficit of this nature ob-

served in FY2021, when Kernel’s Oilseed

Processing segment achieved an EBITDA

of just USD 37 per ton of oil sold, underscor-

ing the margin pressures that could emerge

in the coming year. While the past two sea-

sons favored crushers, in FY2025 the nego-

tiation power will definitely belong to farm-

ers.

• The corn harvest, meanwhile, is estimated

to drop by 6.5 million tons, down 21% y-o-y

due to the summer heat waves. This short-

fall is expected to negatively impact capac-

ity utilization and margins across our grain

export value chain.

Compounding these challenges is an unfavor-

able global situation where Ukraine faces a re-

duced harvest, while other major crop-produc-

ing regions are experiencing strong yields,

leading to potentially weak prices. This rare

combination could have a particularly adverse

impact on Ukrainian farmers: they are con-

tending with both lower crop yields and the in-

ability to capitalize on high prices. A similar

negative outcome is anticipated for Kernel’s

farming segment, making the year ahead ex-

ceptionally difficult.

Update on corporate matters

The Company is still in the process of delist-

ing, which began in spring 2023, but it will be

completed once the Polish Financial Supervi-

sion Authority approves it. This approval is

currently on hold due to legal challenges from

8 minority shareholders, who collectively own

0.4% of the shares in Kernel and have con-

tested the delisting decision in Luxembourg

court.

The same group of minority shareholders also

instrumentalize justice for their personal inter-

est by initiating several other claims against

the Company, including the requests to sus-

pend and annul the share capital increase

conducted in August-September 2023, and

also to suspend and annul the decisions taken

at the annual general meeting of shareholders

held on 11 December 2023. As the Board of

Directors is confident that all the relevant deci-

sions taken were legitimate and had a solid ra-

tionale, the Company is currently defending its

position in courts.

Sustainability progress

Over FY2024, we continued developing our

role as a reliable partner in the decarboniza-

tion of the food supply chain and contribution

to the global climate actions in the agriculture

sector. Within the Farming segment, we fo-

cused on strengthening our methodological

approaches to managing carbon footprint from

agriculture operations. We started working

with Carbon Trust to undertake a gap analysis

of our operational accounting of GHG emis-

sions across individual fields and crops as a

preparatory step for its verification and further

automatization. At Oilseed Processing, we aim

to leverage our existing capacities of green

electricity production to minimize the carbon

footprint of sunflower oil production. As a

demonstration of such ambition, in FY2024,

Kernel’s oil extraction plant in Poltava has

committed to the Science Based Targets initi-

ative, becoming the first company in the

Ukrainian food industry to join this global

framework.

Regarding our social capital priorities, we con-

tinued to adamantly support the Armed Forces

of Ukraine, local communities, and the society

as a whole. We are proud to be among the top

three private companies in Ukraine in terms of

the total military and humanitarian aid pro-

vided since the beginning of the Russian full-

scale invasion. In FY2024, our social spending

amounted to USD 25 million. Further enhance-

ment of our social responsibility and building

the long-term value of the business are among

the company’s strategic priorities, reflecting

the UN Global Compact Ten Principles.

I would like to express our sincere thanks to all

our stakeholders for their continued support.

The entire Kernel team deserves special

recognition for their unwavering dedication

and resilience in overcoming the challenges

posed by the ongoing conflict. Their safety and

well-being remain our top priority. We are also

grateful to the international community for their

invaluable assistance to Ukraine in its struggle

against Russian aggression. A special and

profound thanks go out to the brave Ukrainian

defenders who are courageously protecting

our nation and its people.

Andrii Verevskyi

Chairman of the Board of

Directors, Founder

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Our Business Model

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Oilseed Processing segment

• Leading sunflower oil producer (~6% of global production) and exporter (~9% of global exports);

• Leading bottled sunflower oil producer and marketer in Ukraine;

• 4.0 million tons annual sunflower seed processing capacity;

• Producer of renewable energy from biomass;

Infrastructure and Trading segment

• Leading grain exporter from Ukraine with 10% of country’s total grain export in FY2024;

• Leading grain export terminal operator with total annual capacity to transship 11 million tons of soft commodities;

• #1 private inland grain silo network in Ukraine with 2.2 million tons of one-time grain storage capacity;

• #1 private grain railcar fleet in Ukraine (3.4 thousand of accessible own railcars);

• Avere proprietary trading activities;

Farming segment

• Leading producer in Ukraine operating 358 thousand hectares of leasehold farmland;

• Modern large-scale machinery, sustainable agronomic practices, cluster management system and export-oriented

crop mix;

• Nearly 100% of sales volumes flows through our Infrastructure and Trading and Oilseed Processing segments,

earning incremental profits.

………………………………………………………………………………………………………………………………………………………………………………………………………………………………..

Topping industry league tables in all segments

Export terminals

Oilseed processing

Refining and bottling

Renewable energy

Avere trading operations

Own farming

Origination and procurement

Grain storage

Transportation and logistics assets

Fleet of vessels

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Kernel at Glance

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………

Segment results summary

Revenue, USD m

EBITDA, USD m

Volume, thousand tons

EBITDA margin, USD/t

FY2023

FY2024

y-o-y

FY2023

FY2024

y-o-y

FY2023

FY2024

y-o-y

FY2023

FY2024

y-o-y

Oilseeds processing

1,908

1,864

(2%)

270

(69%)

1,139

1,477

30%

237

(76%)

Infrastructure & trading

2,602

2,011

(23%)

154

204

33%

3,705

5,452

47%

(10%)

Farming

695

481

(31%)

221

171

(23%)

1,849

1,813

(2%)

609

476

(22%)

Unallocated corporate expenses

(101)

(77)

(24%)

Reconciliation

(1,750)

(775)

(56%)

Total

3,455

3,581

544

381

(30%)

Note

1 Physical grain volumes exported from Ukraine (ex. Avere) for Infrastructure and Trading; harvest of grain and oilseeds in the Farming segment.

Note

2 USD per ton of vegetable oil sold for Oilseed Processing; USD per ton of grain exported (ex. Avere volumes) for Infrastructure and Trading; USD per hectare for Farming.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Financial Performance in FY2024

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Kernel completed another turbulent season in

FY2024. Like the previous year, the season began

with the complete closure of Black Sea ports, leading

to a predominantly negative outlook. Following the

termination of the Black Sea Grain Initiative and the

reinstated blockade of Ukrainian deep-water ports,

Russia launched widespread attacks on agricultural

and port infrastructure, deliberately targeting the

Group's assets with missiles and drones. With export

routes closed, we reported a loss-making first quar-

ter, posting a USD 42 million total comprehensive

loss attributable to shareholders. The overall senti-

ment remained negative, with no clear visibility on

when the business environment might improve. High

debt levels posed a significant threat to the Group’s

financial stability.

Fortunately, conditions improved significantly in the

second quarter of FY2024, following the reopening of

Ukrainian Black Sea ports by the Ukrainian Navy.

Kernel returned to profitable operations, generating

an EBITDA of USD 381 million for the full FY2024,

down 30% y-o-y, and a total comprehensive income

attributable to the Company’s shareholders of USD

63 million, a 7% increase y-o-y. While the business

expanded through the addition of new assets (a

greenfield oilseed processing plant, a renewable en-

ergy generation facility, and newly acquired port

transshipment terminals), the Group also recognized

over USD 200 million in non-cash impairment losses

due to a deteriorating business outlook and antici-

pated high risks for the future.

FY2024 was also a highly volatile year in terms of

debt management. We began the year in difficult

negotiations with creditors to restructure debt, as we

were unable to meet all our maturing obligations. It

wasn’t until October 2023 that we completed the re-

structuring. However, by December 2023, with the

operational environment improving, we decided to

repay a significant portion of our debt, resulting in a

relatively low debt level and a comfortable liquidity

position for the Group.

Our liquidity management strategy throughout the

year was focused on maximizing cash balances to

prepare for potential negative scenarios and risks,

given the ongoing war in Ukraine. This approach led

to maintaining the lowest level of working capital in

the past five years, minimizing potential inventory

losses, but also limiting opportunities for business

expansion.

Looking ahead, our outlook for FY2025 remains

somewhat bearish, primarily due to the expected

weak supply of grain and oilseeds in Ukraine, along

with ongoing war-related risks. While we anticipate

remaining profitable under current conditions, the

business remains fragile and highly exposed to vari-

ous risks. We will continue to follow a cautious capital

allocation policy, prioritizing liquidity, seeking new fi-

nancing opportunities, and fulfilling our existing com-

mitments.

Revenue

USD 3,581 million

+4% y-o-y

EBITDA

USD 381 million

-30% y-o-y

Fragile results in a turbulent environment

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Financial Performance in FY2024 continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

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Income statement highlights

In FY2024, the Group generated USD 3,581

million in revenue, up 4% y-o-y. This growth

was driven by higher sales volumes across all

key products – grain, sunflower oil, and sun-

flower meal – boosted by the reopening of

Ukrainian Black Sea ports for exports in mid-

October 2023. However, the increase was

partially offset by lower realized prices. Freight

and other services reached a record high of

USD 405 million, accounting for 11% of total

revenue. Export sales represented 94% of to-

tal revenue.

The Group recognized a USD 10 million loss

from the net change in the fair value of bio-

logical assets and agricultural produce in

FY2024, compared to a USD 115 million loss

in the prior year. This reflects gains from reval-

uing crops in the fields to fair value less costs

to sell as of 30 June 2024, and expensing of

similar gains recorded in the previous year, as

required by IAS 41.

Cost of sales in FY2024 increased by 7% y-

o-y, reaching USD 2,889 million, in line with

revenue growth. This rise was primarily driven

by a 7% y-o-y increase in the cost of goods for

resale and raw materials used, along with a

7% surge in shipping and handling expenses.

Additionally, payroll and payroll-related costs

grew by 24% year-on-year, totaling USD 81

million.

As a result, the gross profit for the period

surged by 7% y-o-y, totaling USD 682 million.

Other operating income amounted to USD

The reduction of interest on lease liabilities in FY2024 is linked to the divestment of selected farming entities with 134 thousand hectares of land. This divestment was

completed as of 3 March 2023.

71 million, up 33% y-o-y, primarily driven by a

one-off insurance payment of USD 34 million

for property damage and business interrup-

tion. This also included USD 9 million in gains

from operations with securities (including

Avere trading), income from stock-taking,

gains on the sale of foreign currency, and in-

come from contract wash-outs.

Other operating expenses totaled USD 23

million, down 34% y-o-y. This included USD

17 million in dispatch and other fines (due to

extended waiting times during vessel loading

and unloading at ports), and a USD 5 million

loss from the Group’s operations with securi-

ties and derivatives.

General, administrative and selling ex-

penses in FY2024 increased by 4% y-o-y,

reaching USD 213 million, primarily driven by

higher payroll and payroll-related costs.

Additionally, the Group recognized USD 11

million in net impairment losses on financial

assets, reflecting provisions made for ac-

counts receivable and loans provided to third

parties.

Kernel also recorded a USD 229 million im-

pairment loss in FY2024, primarily resulting

from the impairment of property, plant, and

equipment (USD 117 million), goodwill impair-

ment related to two oilseed processing plants

acquired earlier by Kernel (USD 58 million),

and the impairment of intangible assets re-

lated to Group’s port transshipment business

(USD 24 million). These impairments were

driven by the anticipated deterioration in the

business outlook, growing competition in

Ukraine, and increasing future risks for the

business. Additionally, this line includes im-

pairment of prepayments to suppliers and

other current assets (USD 26 million), write-

offs of assets destroyed by Russian strikes on

the Group’s assets (USD 14 million) and re-

versals of previously created inventory allow-

ances and provisions for VAT receivable (USD

10 million).

Subsequently, operating profit declined by

37% y-o-y, to USD 276 million.

Finance costs in FY2024 decreased by 22%

y-o-y, totaling USD 119 million, driven by the

substantial repayment of the Group’s bank

loans in December 2023 and reduced lease

payments following the divestment of part of

the Group’s farming business in March 2023

Finance income in FY2024 increased by 62%

y-o-y, settling at USD 50 million, primarily

driven by interest earned on financial assets

held for cash management, as extra liquidity

balances were allocated into interest-bearing

instruments. This also included a USD 6 mil-

lion non-cash gain from the repayment of

some of the Group’s credit facilities at a dis-

count to par. Consequently, net finance

costs decreased by 43% y-o-y, amounting to

USD 69 million for FY2024.

Net foreign exchange gain settled at USD 33

million, primarily driven by the depreciation of

the Ukrainian hryvnia against the USD during

the reporting period and the corresponding re-

valuation of intra-group balances.

Other expenses, net, increased 2.5x y-o-y,

reaching USD 29 million. This primarily

………………………………………………………………………

Kernel’s EBITDA split by segments

USD million

(59)

(65)

(166)

(101)

(77)

134

461

219

221

171

216

359

237

154

204

152

(70)

270

443

806

220

544

381

FY2020 FY2021 FY2022 FY2023 FY2024

Oilseed Processing

Infrastructure and Trading

Farming

Unallocated corporate expenses

Total EBITDA

………………………………………………………………………………………………………………………………………...................

Income statement highlights

USD million

FY2023

FY2024

y-o-y

Revenue

3,455

3,581

Net IAS 41 gain

(115)

(10)

(91%)

Cost of sales

(2,704)

(2,889)

Gross profit

636

682

Other operating income

33%

Other operating expenses

(35)

(23)

(34%)

Net impairment losses on financial assets

(11)

n/a

Loss on impairment of assets

(15)

(229)

15.6x

General, administrative and selling expenses

(205)

(213)

Operating profit

439

276

(37%)

Finance costs, net

(122)

(69)

(43%)

Foreign exchange gain, net

(47%)

Other (expenses), net

(12)

(29)

2.5x

Profit before income tax

368

211

(43%)

Income tax (expenses) / benefit

(69)

(43)

(37%)

Profit for the period

299

168

(44%)

Attributable to equity holders of Kernel Holding S.A.

299

168

(44%)

Non-controlling interest

(0.4)

(0.3)

(22%)

EBITDA

544

381

(30%)

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Financial Performance in FY2024 continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

included USD 25 million in charity expenses

and social spending, USD 6 million in fines

and penalties, and a USD 2 million gain on dis-

posal of subsidiaries, as the Group completed

the sale of three floor-type grain storages in

FY2024 and recognized the respective gain.

With a profit before income tax of USD 211

million, the Group recognized corporate in-

come tax expenses of USD 43 million in

FY2024, resulting in a net profit of USD 168

million attributable to the shareholders of

Kernel Holding S.A. After accounting for ex-

change differences in translating foreign oper-

ations (a loss of USD 97 million) and other

items, the total comprehensive income at-

tributable to equity holders of the Company

amounted to USD 63 million in FY2024, up 7%

y-o-y.

Considering significant uncertainties and risks

related to the Group’s future performance, the

Board of Directors recommended the general

meeting of shareholders to declare a dividend

at nil for the year ended on 30 June 2024.

Cash flow highlights

The Group generated USD 604 million in op-

erating profit before working capital

changes, down 20% y-o-y. This figure was

59% higher than the EBITDA for the reporting

period, reflecting the impact of substantial

non-cash items recognized during the year.

The Group's working capital changes in

FY2024 resulted in a cash outflow of 21 mil-

lion, as compared to USD 128 million cash in-

flow in FY2023.

Interest paid in FY2024 amounted to USD

111 million (including USD 25 million interest

on lease liabilities associated with the farm-

land rent agreements), down 25% y-o-y, while

interest received totaled USD 33 million. Af-

ter accounting for USD 32 million in income

tax paid, Kernel generated USD 472 million in

cash from operating activities, a 34% de-

crease y-o-y.

Net cash generated by investing activities

totaled USD 113 million in FY2024. Major in-

vestments included USD 143 million for the

purchase of property, plant, and equipment

(both maintenance and expansion CapEx),

USD 165 million in purchases of financial as-

sets (highly liquid Ukrainian government

bonds) as a temporary allocation of seasonally

available liquidity in Ukraine, and USD 25 mil-

lion for the acquisition of a subsidiary (a vege-

table oil transshipment terminal in the Reni

River port). Offsetting these expenditures, the

Group received USD 92 million from the dis-

posal of subsidiaries (primarily from the final

payment for the divestment of farming entities

completed in March 2023) and withdrew USD

121 million of pledged deposits previously

used as collateral for certain credit facilities.

In financing activities, the Group repaid USD

790 million in bank borrowings while raising

USD 245 million, primarily from local banks in

Ukraine. Additionally, the Group raised USD

60 million in new equity at the request of its

creditors to complete the debt restructuring

transaction negotiated at the beginning of

FY2024. Finally, the financing activities in-

cluded the repayment of USD 20 million of

farmland lease liabilities.

As a result, the total cash outflow in FY2024

amounted to USD 145 million, compared to

USD 507 million cash inflow in the previous

year, and the Group’s cash position settled at

USD 810 million, down 15% y-o-y.

Debt overview

The Group’s debt liabilities decreased by

35% during FY2024, to USD 1,090 million as

of 30 June 2024, primarily driven by a 63% y-

o-y reduction in outstanding bank debt. The

Group’s debt management approach in

FY2024 was as follows:

• Early in the year, the Group was negotiating

its third wartime debt restructuring with

creditors to extend its debt maturity profile.

These negotiations concluded in October

2023, when the Group secured waivers for

USD 778 million in pre-war borrowings, de-

ferring repayment, waiving debt covenants,

and adjusting other conditions through 30

June 2024.

• Following the reopening of Ukrainian deep-

water seaports for civilian navigation by the

Ukrainian Navy in October 2023, the busi-

ness environment for the Group improved

significantly. After observing stable export

activity for three months, confidence in busi-

ness prospects increased, and the Group

decided to repay a major portion of its bank

debt in December 2023, including grain and

sunflower oil PXF facilities and various bi-

lateral loans.

• Between January and April 2024, the Group

successfully exited waiver agreements with

remaining lenders under long-term facilities

and resumed servicing its debt according to

the original repayment schedules.

• Between April and June 2024, the Group

raised new financing, primarily from local

Ukrainian banks, securing a total of USD

………………………………………………………………………………………………………………………………………..................

Liquidity positions and credit metrics

USD million, except for ratios

30 June 2023

30 June 2024

y-o-y

Short-term interest-bearing debt

878

323

(63%)

Lease liabilities

198

170

(14%)

Eurobonds

596

598

Debt liabilities

1,672

1,090

(35%)

Cash and cash equivalents

1,077

810

(25%)

Net debt

595

281

(53%)

Commodity inventories

282

247

(12%)

of which edible oil and meal

118

(20%)

Sunflower seeds

3.3x

Grains and other commodity inventories

138

(51%)

Adjusted net debt

313

(89%)

Shareholders’ equity

1,742

1,865

Net debt / EBITDA

1.1x

0.7x

-0.4x

Adjusted net debt / EBITDA

0.6x

0.1x

-0.5x

EBITDA / Interest

4.4x

5.5x

+1.0x

……………………………………………………………………..

Kernel

2027 Eurobonds mid-YTM

Source: Refinitiv

10%

20%

30%

40%

50%

Jan-21

Jul-21

Jan-22

Jul-22

Jan-23

Jul-23

Jan-24

Jul-24

……………………………………………………………………..

Working capital and debt position

USD billion

“Working Capital”, “Net Debt” and “Commodity inventories”

definitions as described in section Alternative Performance

Measures

0.0

0.5

1.0

1.5

2.0

2.5

FY2020 FY2021 FY2022 FY2023 FY2024

Working Capital

Net Debt

Commodity inventories

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Financial Performance in FY2024 continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

149 million to meet the financing needs for

the upcoming season.

Consequently, the Group's total debt out-

standing as of 30 June 2024 amounted to

USD 1,090 million, comprising:

• USD 598 million book value of Eurobonds

maturing in October 2024 (USD 300 million

principal) and October 2027 (USD 300 mil-

lion principal). After the reporting date, the

notes maturing in October 2024 were suc-

cessfully repaid;

• USD 323 million in other debt (including

USD 164 million owed to the EIB and

EBRD, USD 148 million owed to other

Ukrainian and international banks, and USD

11 million in accrued interest on bonds and

bank loans);

• USD 170 million in lease liabilities arising

from farmland lease agreements entered

into by the Group.

As of 30 June 2024, the Group continued to

classify its bank borrowings with long-term in-

itial contractual maturity as short-term as the

Group waived certain financial and non-finan-

cial covenants for a period of less than 12

months. Upon the exit from the standstill, the

Group obtained waivers for covenants cover-

ing the period until March 2025.

The Group’s cash position stood at USD 810

million as of 30 June 2024, a 15% y-o-y de-

cline

. As a result, the Group’s net debt was

reduced by more than half during FY2024,

reaching USD 281 million as of 30 June 2024.

The commodity inventories

balance as of

30 June 2024 totaled USD 247 million, down

12% y-o-y, covering 88% of net debt outstand-

ing. Inventories related to the oilseed pro-

cessing business (sunflower seeds, edible oil,

and meal) increased in value by 24% y-o-y,

reaching USD 179 million, while grain invento-

ries decreased by 51% y-o-y, to USD 68 mil-

lion. As of 30 June 2024, Kernel had in stock

111 thousand tons of sunflower oil, 51 thou-

sand tons of sunflower meal, 200 thousand

tons of sunflower seeds, and 410 thousand

tons of grain. These commodity inventories

accounted for 89% of the total inventory bal-

ance.

As of the end of FY2024, the net debt ad-

justed for commodity inventories settled at

USD 34 million, down 89% over the reported

period.

As of 30 June 2023, the cash balance included a USD 123 million cash deposit that had been pledged as collateral for certain credit facilities in FY2023. However,

this deposit was withdrawn during FY2024, as the pledge was no longer required. Although this deposit was not treated as cash available to the Group in the accounts,

it was considered cash for the purposes of calculating credit and liquidity metrics.

Commodity inventories are inventories such as corn, wheat, sunflower oil, and other products that were easily convertible into cash before the Russian invasion of Ukraine

given their commodity characteristics, widely available markets and the international pricing mechanism. The Group used to call such inventories “Readily marketable invento-

ries”, but after the beginning of the war in Ukraine the Group faced difficulties selling such inventories, and therefore such inventories cannot any longer be considered as readily

marketable.

The key leverage metrics as of 30 June 2024

improved to 0.7x Net debt / EBITDA, 0.1x Ad-

justed net debt / EBITDA, and 5.5x EBITDA /

interest coverage.

In April 2024, S&P affirmed Kernel’s rating

at “CC”. Additionally, in October 2024, Fitch

upgraded Kernel’s credit rating to CCC-.

Undrawn facilities as of 30 June 2024

amounted to USD 206 million, primarily com-

prising short-term bank facilities in Ukraine

and Avere’s financing.

After the end of the reporting period, the

Group successfully repaid USD 300 million

of the Eurobond maturing on 17 October

2024, along with the respective coupon. Ini-

tially, the Group faced difficulties accumulat-

ing the required amount in accounts outside

Ukraine due to capital and currency controls

imposed by the National Bank of Ukraine.

However, some of the easing of currency re-

strictions allowed the Group to accumulate the

necessary liquidity and complete the Euro-

bond repayment, demonstrating its commit-

ment to meeting financial obligations.

Additionally, in October 2024, we entered a

USD 150 million sunflower oil pre-export fi-

nancing facility with a syndicate of interna-

tional banks to support the Group's export op-

erations and meet working capital needs for

the upcoming financial year. The facility ma-

tures in August 2025 with an option for exten-

sion. It is the first new financing provided by

international lenders to Kernel since the onset

of the full-scale war in Ukraine.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Oilseed Processing

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Such investments are attributable to Infrastructure and Trading segment and provide services to the Oilseed Processing segment.

Oilseed Processing remained the Group's largest

earnings contributor for the second consecutive

year, benefiting from a favorable sunflower seed sup-

ply-demand balance in Ukraine, business expansion

through the construction of new assets, and in-

creased resilience in the sunflower oil export value

chain due to investments in transshipment and trans-

portation assets. However, earnings were adversely

impacted by a low-price environment in FY2024.

Ukraine's 2023 sunflower harvest reached 14.6 mil-

lion tons (up 18% y-o-y), fueled by near-record yields

and expanded farming acreage. Oilseed processing

capacities increased by 12% y-o-y, driven by new as-

set construction and the reactivation of war-idled

plants. Overall, capacity utilization growth in

Ukraine in the FY2024 season positively supported

crush margins.

In FY2024, we completed the construction of

Ukraine's largest oilseed processing plant, which

was 80% finished before the war. Originally launched

in 2017, the project was delayed by the COVID-19

pandemic and then paused in 2022 due to the war.

With renewed confidence in export capabilities, we

resumed construction. The facility has increased our

annual sunflower seed processing capacity by 1 mil-

lion tons, bringing the total to 4 million tons and com-

pensating for the loss of two plants in eastern

Ukraine. As a result, we increased oilseed pro-

cessing volume by 24% y-o-y to 3.2 million in

FY2024, returning to pre-war levels.

We also completed a large-scale green energy in-

vestment program. In December 2023, we

launched our fifth cogeneration heat and power facil-

ity with a 20 MW capacity, followed by the final 20

MW CHP unit in October 2024, bringing our total bi-

oenergy portfolio to 84.4 MW.

Finally, the resilience of our export value chain

improved through strategic investments in port in-

frastructure and logistics assets. We now operate

three vegetable oil transshipment terminals in differ-

ent ports, along with a vegetable oil tanker and a fleet

of rail tanks and tank containers

, which diversify

and strengthen our export capabilities.

Despite benefiting from favorable factors and the ab-

sence of major export disruptions due to war, the pri-

mary downside in FY2024 was the very low prices

for sunflower oil. Given the adverse market condi-

tions and forecasts, the Group recognized a USD

172 million loss on impairment of assets. Conse-

quently, the segment’s EBITDA declined by 69% y-

o-y to USD 83 million, which also included a one-off

USD 27 million insurance reimbursement for prop-

erty damage and business interruption.

FY2025 outlook

The key factor driving the performance in FY2025

will be the unfavorable S&D balance in Ukraine, as

sunflower harvest will reduce, but crush capacities

keep growing to result in the largest-ever deficit of

seeds in the country, sharpening the competition for

the feedstock and depressing margins.

3.2 million tons of

oilseeds processed in

FY2024

EBITDA

(before unallocated head office expenses)

USD 83 million

-69% y-o-y

Revenue

USD 1,864 million

-2% y-o-y

Sustaining excellence amidst adversity

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Oilseed Processing continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Market overview

Historically, the two key factors were materi-

ally affecting Kernel’s oilseed processing busi-

ness: 1) the global sunflower oil prices, im-

pacting the combined earnings of local sun-

flower seed farming and processing; and 2)

the sunflower seed supply-demand balance

in Ukraine, which determined the profit distri-

bution between farmers and crushers in the

country.

Since Russia’s full-scale invasion of Ukraine in

February 2022, capabilities to export sun-

flower oil and meal via channels other than

Ukrainian Black Sea ports and the cost of such

logistics became a new important factor. As

new export routes have been established in

FY2023 and Black Sea ports (specifically

Odesa, Chornomorsk, and Pivdennyi) fully re-

sumed operations starting from mid-October

2023, the market has returned to the normal

course of business.

Supply-demand balance

Over the years, Ukraine's sunflower seed pro-

cessing has been heavily localized, with the

vast majority of sunflower seeds harvested by

local farmers being then processed within the

country. Import-export activities for sunflower

seeds were negligible, and there was minimal

carry-over stock between seasons. However,

this landscape underwent a significant trans-

formation following February 2022. Large vol-

umes of sunflower seeds were exported dur-

ing FY2022-FY2023. However, in FY2024 the

situation on the market returned to normal so

that only 0.3 million tons of sunflower seeds

were exported, and the rest of the harvested

seeds were processed.

In FY2024, sunflower seed processing ca-

pacity in Ukraine increased by 13% y-o-y, to

18.7

million tons (not including the plants on

the occupied territories or those with sus-

pended operations for the whole or part of the

season due to the proximity of the frontline).

Local crushers that ceased operations in the

previous two seasons resumed production, in-

creasing the competition for the feedstock.

Sunflower seed harvest increased by 2.2

million tons, to 14.6 million tons, driven by the

larger harvested area and higher yields on the

back of supportive weather conditions. At the

same time, the carry-in stock was substan-

tially lower than for FY2023, which all together

widened the gap between crushing capac-

ities and supply of seeds, squeezing the

crushing margin over the season.

Source: Kernel’s estimate.

Source: USDA.

Source: Kernel’s estimate.

Global sunflower oil prices

Sunflower oil is the fourth-largest consumed

vegetable oil in the world, with a 9.6% mar-

ket share in the 2023/24 season. The largest

consumers and importers are India, EU,

China, Turkey, Iran, Iraq, and Egypt, collec-

tively accounting for 80% of the global imports.

Meanwhile, Ukraine stands as the largest

global exporter, contributing 42% to the total

exports

. Throughout the 2023/24 season,

Ukraine exported 6.3 million tons of sunflower

oil, marking an 18% y-o-y increase. In

FY2024, we accounted for ~22% of Ukraine’s

sunflower oil export

In FY2024, the vegetable oil market experi-

enced significant volatility influenced by a

complex interplay of geopolitical events,

weather patterns, policies, and evolving de-

mand dynamics. However, vegetable oil

prices demonstrated adequate resilience,

avoiding sharp declines and maintaining a rel-

atively stable trajectory albeit remaining at low

levels:

• A notable price rally occurred in July 2023,

primarily driven by uncertainty over Black

Sea exports and adverse weather condi-

tions impacting North American soybean

and canola crops. Concurrently, U.S. bio-

diesel demand was on the rise, particularly

for soybean oil, as more states pushed for

renewable fuel mandates. This surge in bi-

odiesel demand further supported prices

during the marketing year.

• Subsequently, the market experienced a

period of stabilization as active oilseed

crushing in the Northern Hemisphere was

followed by a slowdown in global demand.

However, concerns over Brazilian soybean

planting conditions and continued strong

U.S. biodiesel demand supported prices. By

December, improved weather in Brazil and

a record sunflower crop contributed to a

more comfortable supply and demand bal-

ance.

• A palm oil deficit emerged in early 2024 in

the main production areas of Malaysia and

Indonesia, leading to a price hike that pulled

up the values of all vegetable oils. Sun-

flower oil filled the shortage of palm oil in In-

dia, the biggest consumer of vegetable oils.

Following the switches between different

kinds of vegetable oils and further improve-

ment in palm oil production, a downward

correction occurred, causing a redistribution

of the demand pool, which accelerated over

time due to a more active crush and in-

creased export supply of South American

soybean oil during May-June 2024.

• Prices rebounded again in May and re-

mained strong until mid-July, driven by tight-

ening rapeseed supplies in Europe, drought

in the Black Sea area affecting sunflower

crops, and tighter balance sheets in the en-

ergy markets, with crude oil and gasoil re-

visiting year highs.

Outlook for FY2025

In FY2025, the global vegetable oil market is

projected to be relatively balanced.

Key factors shaping the prices include abun-

dant soybean availability offsetting tighter sup-

plies of palm, sunflower, and rapeseed oils,

South American crop weather, and evolving

policies. Given the anticipated tight supply,

which will become more evident in the second

part of the crop year, sunflower oil is expected

to trade at a noticeable premium compared to

competing oils, following the supply seasonal-

ity patterns predominantly in the Black Sea re-

gion.

Kernel's primary concern for FY2025 is the

significant imbalance in Ukraine’s sunflower

seed market. The forecast for the season indi-

cates the largest-ever gap between the

oilseed harvest and processing capacities,

posing a major challenge for the industry.

……………………………………………………………………

Sunflower oil price, FOB 6 ports

USD per ton of unrefined oil sold in bulk

Source: Agricensus,

Kernel

600

800

1,000

1,200

1,400

1,600

1,800

2,000

2,200

2,400

2,600

2,800

FY2024

FY2021 FY2022 FY2023

……………………………………………………………………………………

Processing capacities in

FY2024

million tons

Source: Kernel’s estimates

17%

14%

24%

37%

Kernel Multinationals MHP

Local big Local small

18.7

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Oilseed Processing continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Our business model

Market leader in oilseed processing

Kernel is the leading global producer and ex-

porter of sunflower oil. In FY2024, we ac-

counted for ~6% of global sunflower oil pro-

duction and ~9% of global sunflower oil ex-

port

Asset base

Kernel owns seven oilseed processing plants

across various regions in Ukraine

. Following

the mid-season launch of its new plant in west-

ern Ukraine in February 2024, the Group ef-

fectively operated 3.2 million tons of sun-

flower seed processing capacity in FY2024

(17% of Ukraine’s total

) but will have 4 mil-

lion tons for full-season operation in

FY2025 (20% of Ukraine’s total

Most of the Group's crushing facilities are

multi-seed, enabling the processing of soy-

beans or rapeseed as needed. These assets

operate year-round, with maintenance typi-

cally scheduled for one month during the sum-

mer.

At our plants, we have constructed six cogen-

eration heat and power facilities (CHPs)

that utilize sunflower husk (biomass) to gener-

ate electricity for sale to the national grid, with

a combined capacity of 84.4 MW. These

CHPs also enable us to power our crushing

operations and achieve energy self-sufficiency

during power outages in Ukraine.

The oilseed processing plant in Poltava is

equipped with refinery, bottling, and pack-

aging lines, featuring a maximum annual re-

fining capacity of 131.4 thousand tons of oil.

The Group’s crushing plants are modern, well-

maintained facilities that are regularly up-

graded, providing Kernel with processing cost

advantages over many competitors. Energy

self-sufficiency is also an important advantage

in the current Ukrainian market. Additionally,

Kernel’s scale enables more efficient utiliza-

tion of the Group’s nationwide origination net-

work and better allocation of overhead costs

over larger volumes.

All the assets are located across the sunflower

seed production belt in Ukraine in close prox-

imity to farmers, which supports crush

Source: USDA, Kernel analysis.

Two of Kernel’s oilseed processing plants, which were occupied by Russia at the beginning of the war in February 2022, remained non-operational during the reporting

period, being located close to the Russian border and regularly suffering from Russian air attacks. Closer to the end of FY2024 and due to the Russian offensive in the

Kharkiv region, these facilities sustained severe damages, making the restoration of processing capacities unfeasible in the foreseeable future. Both assets were fully

impaired back in FY2022.

Source: Kernel’s estimates.

In previous years, bulk sunflower oil sales were primarily managed through our Avere subsidiary reaching CIF-basis destinations and earning additional margin for

Infrastructure and Trading segment. However, since FY2023, we have shifted our strategy to focus more on direct sales. In FY2024, Avere handled only 11% of our

total edible oil sales.

capacities utilization rates and profitability, as

the low density of sunflower seed negatively

impacts the economics of long-distance seed

transportation.

Origination and production

The Group heavily relies on procuring sun-

flower seeds from external farmers, as the

Group’s Farming segment secured only 11%

of the sunflower seeds and 25% of the rape-

seeds processed in FY2024.

Sunflower seed processing yields two primary

products: sunflower oil and meal, both of

which are exported globally. These products

are loaded to vessels in ports primarily

through the Group’s own terminals.

Sunflower seed husk, a biomass by-product,

is primarily burned in-house to generate steam

for production purposes and electricity for in-

ternal use and sale to the national grid.

Sales

Vegetable oil in bulk

Oilseed processing is primarily export-ori-

ented, with over 90% of produced sunflower

oil exported in bulk to key markets such as In-

dia, Europe, UAE, China, and Iraq. In FY2024,

87% of bulk oils sales were on CIF/CFR terms,

while FOB sales accounted for 7% of the

Group’s export volume

Nearly 600 thousand tons of vegetable oil

were exported through Danube River ports, in-

cluding our Reni port facility, as we decided to

maintain this export channel considering the

uncertainty in the export logistics. Another 600

thousand tons were shipped via our deep-wa-

ter terminals in Chornomorsk and Pivdennyi,

with the remaining volumes primarily trans-

ported by inland rail.

Our tanker 'Mavka' transported 219 thousand

tons of oil to destinations such as Turkey, Italy,

and Spain, while also serving as a shuttle be-

tween Reni and Constanta when Ukrainian

Black Sea ports were unavailable.

Kernel’s main customers are soft commodity

processors refine and bottle sunflower oil, and

international traders. The largest customer in

FY2024 was Gemini Edibles & Fats India Ltd,

contributing 7.5% of total bulk oil sales.

……………………………………………………………………………………

Edible oil sold in bulk destinations FY2024

thousand tons

45%

30%

India Europe UAE Iraq China Other

1,393

……………………………………………………………………………………

Bottled sunflower oil destinations FY2024

million liters

42%

Ukraine Europe Middle East

Africa ASIA Other

……………………………………………………………………………………

Kernel oilseed processing volumes

thousand tons

Note 1: We revised processing

volumes, adding volumes processed un-

der the tolling agreements

629

663

482

490

610

951

1,001

985

687

811

941

902

563

745

816

916

617

157

655

953

3,436

3,183

2,187

2,577

3,191

FY2020 FY2021 FY2022 FY2023 FY2024

Q1 (ends 30 Sep) Q2 (ends 31 Dec)

Q3 (ends 31 Mar) Q4 (ends 30 Jun)

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Since FY2023, Kernel has been engaged in

sunflower oil trading, purchasing oil on a

CPT basis in Ukraine and exporting it on

CIF/CFR terms. We exported 38 thousand

tons of oil in such a way in FY2024, an 18%

growth y-o-y, capturing trading margins from

this business.

Vegetable meals

Sunflower meal is also a fully export-oriented

product, with exports primarily handled

through the Group’s terminal in Chornomorsk,

and some volumes shipped via Danube River

ports and inland routes.

Bottled sunflower oil

In FY2024, about 9% (131 thousand tons) of

crude sunflower oil was further refined, with

64% (84 thousand tons) of this refined volume

bottled at our Poltava plant, generating addi-

tional margin from this higher value-added

product. The remaining refined oil was sold in

bulk.

In FY2024, 58% of bottled sunflower oil pro-

duction was exported to Europe, the Middle

East, Asia, and Africa under Kernel brands

and private labels. Kernel held a 19% share of

Ukraine's total refined bottled sunflower oil ex-

ports, supplying international retailers like

Walmart and Maxima.

42% of bottled oil was sold domestically

through 20 nationwide retailers and 28 re-

gional distributors. Domestic sales were split

77% to retailers and 23% to distributors under

brands like "Schedryi Dar," "Stozhar," and

"Chumak."

Renewable energy

All renewable energy produced by Kernel’s

CHPs was previously sold under long-term

power purchase agreements to the state-

owned enterprise "Guaranteed Buyer," which

was obligated to purchase the energy at a

fixed feed-in tariff of 0.12 EUR/kWh until 2030.

However, since September 2024, we have

shifted to selling electricity on the open mar-

ket, as the energy deficit in Ukraine – caused

by Russian attacks on the country’s energy in-

frastructure – has driven day-ahead market

prices to levels that make selling to "Guaran-

teed Buyer" less attractive.

Contractual commitments

As of June 30, 2024, the Group had contrac-

tual commitments to sell 186 thousand tons

of sunflower oil for USD 184 million (USD 988

per ton) and 11 thousand tons of sunflower

meal for USD 40 million (USD 270 per ton).

Includes USD 19 million invested in CHP equipment at our Vovchansk oil extraction plant, which was written off in FY2022 due to the war.

Key developments

Completion of large-scale investment

program

In FY2024, we completed strategic investment

projects initiated back in FY2018, which had

been delayed due to the COVID-19 pandemic

and the war in Ukraine.

Renewable energy investment program

The project involved installing co-generation

heat and power (CHP) units at our oil-extrac-

tion plants to burn sunflower husk, a biomass

by-product, and generating electricity for both

grid sale and internal use, as well as steam for

sunflower oil production.

Before the full-scale war in Ukraine, four CHP

units with a combined capacity of 44.4 MW

were completed. In December 2023, we

launched a fifth 20 MW unit at the Prydniprov-

skyi oil extraction plant, with total costs of USD

46 million. After the reporting period, in Octo-

ber 2024, we commissioned the final 20 MW

CHP unit at our new plant in the Khmelnytskyi

region, costing USD 48 million.

Although the loss of our plant in the Kharkiv

region together with ready-to-install CHP

equipment reduced the project's scope, we

still became Ukraine's largest biomass elec-

tricity producer, with 84.4 MW of power gener-

ation capacity. This asset portfolio strengthens

our resilience to power outages and supports

the profitability of the Oilseed Processing seg-

ment. The project is strategically important

nowadays, contributing to Ukraine’s energy

security, reducing power outage and business

interruption risks for Kernel, and promoting en-

vironmental sustainability.

Total project investments amounted to USD

237

million.

Brand-new oilseed processing plant

In February 2024, the Group commissioned its

state-of-the-art oilseed processing plant in the

Khmelnytskyi region, western Ukraine. With

an annual processing capacity of 1 million tons

of sunflower seeds, it is the largest facility of

its kind in Ukraine. By the end of the reporting

period, the plant was operating at full capacity,

processing both sunflower seeds and rape-

seed.

War impact

The ongoing war in Ukraine has had a pro-

found impact on our operations, manifesting in

several areas:

• Assets destruction. At the start of FY2024,

two of our oilseed processing plants in the

Kharkiv region, with a combined annual pro-

cessing capacity of 0.5 million tons of

sunflower seeds, remained shut down due

to their proximity to active hostilities and fre-

quent missile and artillery attacks. These fa-

cilities have been closed since FY2022.

Many employees were relocated and rede-

ployed at other Company plants, and valua-

ble equipment was transferred to other fa-

cilities. However, by the end of FY2024, our

Vovchansk oilseed processing plant in the

Kharkiv region was completely destroyed

following a Russian offensive and heavy

fighting in the town. Our second plant in the

region, located in Prykolotne, sustained se-

vere damage from bombardments, tragi-

cally resulting in the loss of two employees

and injuries to three more.

• Logistics disruptions. At the beginning of

FY2024, Russia’s unilateral termination of

the Black Sea Grain Initiative and subse-

quent attacks on Ukraine's port infrastruc-

ture severely disrupted our logistics. With

the blockage of seaborne exports, espe-

cially for sunflower meal, our oilseed pro-

cessing operations were threatened. Stock-

piling of sunflower meal led to plant stop-

pages, and during Q1 FY2024, we shipped

……………………………………………………………………………………

Kernel bottled oil core brands

………………………………………………………………………………..…

Kernel bottled oil selected customer

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only 159 thousand tons of meal. Fortu-

nately, the Black Sea was de-blocked by the

Ukrainian navy in autumn 2023, allowing

exports to resume. In Q2 FY2024 (October–

December 2023), we shipped 399 thousand

tons of meal, returning to a normal export

pace. A more prolonged blockade would

have severely disrupted our oilseed pro-

cessing operations, as sunflower meal

sales are crucial to the business, and it is

unsustainable to export only sunflower oil

without sunflower meal.

• Power outages. In the second half of

FY2024, Russian attacks on Ukraine's en-

ergy infrastructure intensified, causing

widespread blackouts and power outages.

These outages, along with power surges,

led to temporary stoppages of machinery

and equipment. In some instances, it took

several days to restore operations to nor-

mal, further impacting our production ca-

pacity.

• Conscription of employees. The ongoing

war has also impacted our workforce, as

employee conscription into the Ukrainian

military created significant labor shortages

at our crushing plants. Finding and retaining

qualified personnel became increasingly

difficult, especially in high-risk regions. The

need to frequently replace conscripted em-

ployees disrupted operations and added

pressure to the remaining workforce, affect-

ing plant productivity and efficiency.

Headcount

In FY2024, the headcount in the Oilseed

Processing segment decreased by 2% y-o-

y, to 2,479 employees. No war-related staff

cuts were introduced during FY2024.

Performance overview

In FY2024, Kernel processed 3.2 million

tons of oilseeds

, up 24% y-o-y, achieving

98% capacity utilization of its oil extraction

plants. This increase was driven by the expan-

sion of crushing capacity following the com-

missioning of the new oil extraction plant in

western Ukraine in February 2024, as well as

the uninterrupted operation of existing facili-

ties. Processed volumes include 127 thou-

sand tons of own rapeseeds and 188 thou-

sand tons of oilseeds via tolling agreements in

FY2024 (nil and 75 thousand tons respectively

in FY2023), to maximize plants’ capacity utili-

zation. Kernel’s market share in Ukraine’s

sunflower seed processing is estimated at

21% for FY2024, unchanged as compared to

FY2023.

With increased processing volumes, edible

oil sales grew by 30% y-o-y, reaching 1,477

thousand tons in FY2024 (1,430 thousand

tons of sunflower oil and 47 thousand tons of

Includes 188 thousand tons of oilseeds processed by Kernel plants in FY2024 via tolling agreements.

rapeseed oil). This includes 84 thousand tons

of bottled sunflower oil (a 2% decrease y-o-y)

and 38 thousand tons of sunflower oil pur-

chased on a CPT basis in Ukraine and ex-

ported (an 18% increase y-o-y).

In addition to edible oil sales, the Group sold

1,207 thousand tons of sunflower meal and

43 thousand tons of rapeseed meal, both

by-products of the oilseeds crushing process.

While less valuable than oil, sunflower meal

sales are essential for capturing the full crush-

ing margin and preventing stockpiles, which

could disrupt plant operations. Smooth sales

are critical due to the relatively short shelf life

of sunflower meal.

The Oilseed Processing segment EBITDA in

FY2024 declined by 69% y-o-y to USD 83 mil-

lion. Key elements influencing FY2024 earn-

ings include:

• A reduction in crushing margin, primarily

due to weak global sunflower oil prices, with

reduced logistics costs and insurance pre-

miums partially offsetting the impact.

• Higher processing and sales volumes

driven by new capacities added in FY2024,

though insufficient to fully compensate for

margin decline.

• Due to the deteriorating market conditions,

increased competition in Ukraine's oilseed

processing sector, and higher future risks,

we recognized a one-off impairment loss

of property, plant, and equipment, as well as

goodwill, totaling USD 167 million. Also, we

recognized a USD 5 million loss on impair-

ment of prepayments to suppliers and other

current assets.

• Increased contributions from the renew-

able energy business line. Following the

launch of the fifth CHP unit with a capacity

of 20 MW, we sold to the grid or replaced

the purchase from the grid of 369 GWh of

electricity in FY2024 (vs 231 GWh in

FY2023). As a result, renewable energy

generation resulted in USD 24 million

EBITDA in FY2024, up from USD 12 million

a year ago.

• Bottled oil sales contributed USD 14 mil-

lion EBITDA, down from a record USD 22

million in FY2023, as bottled oil premium

over unrefined bulk oil normalized in

FY2024.

• A one-time gain of USD 27 million from

insurance payments for property damage

and business interruption due to the Rus-

sian invasion of Ukraine.

As a result, EBITDA per ton of oil sold in

FY2024 was USD 56, down 76% y-o-y.

FY2025 outlook

The upcoming season is expected to bring sig-

nificant challenges for the crushing business,

worsened by the ongoing war in Ukraine.

While we entered FY2025 with record-high

processing capacity (7 plants with a total an-

nual crushing capacity of 4 million tons), max-

imizing utilization will be a difficult task. De-

spite opening stocks of 200 thousand tons of

sunflower seeds – nearly 3x higher than last

……………………………………………………………………………………

Oilseed Processing segment EBITDA

152

(70)

270

100

(73)

237

FY2020 FY2021 FY2022 FY2023 FY2024

USD million USD / ton of oil sold

……………………………………………………………………………………………………………………………………………………

Oilseed Processing segment performance

FY2023

FY2024

y-o-y

Oilseeds processed

thousand tons

2,577

3,191

24%

Edible oil sales

thousand tons

1,139

1,477

30%

Revenue

USD million

1,908

1,864

(2%)

EBITDA

USD million

270

(69%)

EBITDA per ton of oil sold

USD / ton

237

(76%)

EBITDA margin

% of revenue

14.2%

4.5%

(68%)

……………………………………………………………………………………

Meal sales by type of oilseeds

thousand tons

1,420

1,408

889

984

1,207

1,420

1,408

962

984

1,250

FY2020 FY2021 FY2022 FY2023 FY2024

Sunflower meal Rapeseed meal

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year – this is unlikely to offset the unfavorable

supply-demand environment expected in

FY2025.

Supply-demand balance

Sunflower seed supply in Ukraine

We expect Ukraine's sunflower seed harvest

in 2024 to decline by 17% y-o-y to 12.1 million

tons, driven by:

• Crop yield reduction: dry weather during

the pollination and ripening periods is ex-

pected to reduce yields by 12% y-o-y to

2.26 tons per hectare.

• Reduced harvested area: we estimate the

2024 sunflower acreage to decline by 6% y-

o-y to 5.4 million hectares, as farmers, in-

cluding Kernel’s farming business, shift to a

more sustainable crop mix, reducing sun-

flower plantings from the unsustainably high

levels seen during the early war years in

Ukraine.

While some relief may come from the surpris-

ingly high oil content in sunflower seeds ob-

served at the beginning of the season, it is un-

likely to compensate for the production drop.

Oilseed processing capacities

Crushing capacity in Ukraine is expected

to reach 20 million tons in FY2025, a 7% y-

o-y increase driven by new plant construction.

This will widen the gap between crushing ca-

pacity and sunflower seed supply to a record

8.1 million tons, with industry capacity utiliza-

tion projected to fall to an all-time low of 60%.

The most recent low point was FY2021 when

Kernel generated just USD 37 EBITDA per ton

of oil sold. Margin pressure is already evident

at the beginning of the season, as farmers

hold back oilseeds, expecting higher prices.

Competition for oilseeds will be intense, lead-

ing to early shutdowns of processing plants

and a shift towards processing other oilseeds.

We will face a trade-off between optimizing ca-

pacity utilization and maximizing margins but

aim to maintain above-market utilization lev-

els.

At the start of the season, two of our oil extrac-

tion plants switched to rapeseed processing,

and we plan to test soybean processing for the

first time. Additionally, we will continue offering

tolling services and processing oilseeds pro-

vided by third parties.

War impact

War risks remain the most significant threat to

our business. There is a risk of damage to port

infrastructure and crushing plants. Blackouts

in Ukraine, due to ongoing Russian attacks on

the country’s energy grid, could also disrupt

the inland railway transportation of sunflower

oil and meal. Finally, the conscription of our

employees may cause business interruptions.

For example, in early August 2024, our largest

oilseed processing plant in western Ukraine

was damaged by a Russian drone attack,

leading to a temporary shutdown. The esti-

mated damage was USD 341 thousand. Op-

erations resumed in September 2024 after a

month of pre-season maintenance and re-

pairs.

Although we have taken steps to reduce these

risks by diversifying export channels and in-

vesting in energy self-sufficiency, the full im-

pact of the war remains unpredictable.

Other profit drivers

Our electricity generation business is ex-

pected to grow in FY2025. In October 2024,

we commissioned the final 20 MW CHP unit,

bringing our total capacity to 84.4 MW. We aim

to sell over 500 GWh to the grid in FY2025, a

36% y-o-y increase, which will serve as a ba-

sis for earnings growth.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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Infrastructure and Trading

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FY2024 was one of the most challenging periods in

Kernel’s history, particularly for the Infrastructure and

Trading segment, which faced severe disruptions in

export logistics and the constant threat of war-related

damage to core assets.

The season began as a total disaster: major export

routes via Ukrainian Black Sea ports were blocked

as Russia terminated the Black Sea Grain Initiative,

key assets were hit by Russian missile and drone at-

tacks, inventories remained high, and there was no

clear outlook for improvement. The ongoing Russian

invasion of Ukraine casted a long shadow over the

Group’s operations.

Fortunately, after three months of uncertainty, civil

navigation through Ukrainian Black Sea ports re-

sumed in October 2023, providing much-needed re-

lief. This allowed Kernel to increase grain export vol-

umes to 5.5 million tons in FY2024, up 47% y-o-y,

reinforcing its position as Ukraine’s largest grain ex-

porter with a 10% market share. We also significantly

reduced inventory levels – from 1.1 million tons at the

start of the season to 0.4 million tons by season’s

end, much closer to pre-war norms. Finally, we re-

sumed active grain procurements, originating 3.3 mil-

lion tons of grain in Ukraine in FY2024, a 3.3x growth

y-o-y.

Despite the adversities, Kernel demonstrated re-

markable resilience, leveraging its extensive logisti-

cal network and adaptive strategies. Investments in

additional transshipment capacity at Reni and Chor-

nomorsk, alongside the expansion of rail and fleet as-

sets, helped mitigate some of the logistical bottle-

necks caused by the war.

Subsequently, the segment generated USD 204 mil-

lion in EBITDA, including a USD 53 million contribu-

tion from Avere's global trading operations unrelated

to Ukraine and a loss of USD 61 million due to im-

pairment of assets.

FY2025 Outlook

The reliance on Black Sea ports remains critical, and

any future escalation could once again halt export

operations. Russia continues to jeopardize global

food security by targeting civilian vessels carrying

grain, as well as port infrastructure. Ongoing security

concerns, fluctuating export routes, and the unpre-

dictability of global markets will continue to test Ker-

nel’s Infrastructure and Trading segment for resili-

ence in FY2025.

Additional pressure is expected due to a reduced

grain supply in Ukraine available for export in

FY2025, unlike the previous two seasons. Grain ex-

ports in FY2025 are projected to decline by 10.8 mil-

lion tons y-o-y, a 22% drop. This will likely lead to

underutilized capacities and depressed margins

across the entire export value chain.

Despite these challenges, Kernel’s commitment to

adaptability, operational efficiency, and strategic in-

vestments will be crucial in navigating the uncertain

and volatile environment ahead.

Exported 5.5 million

tons of grains from

Ukraine in FY2024

EBITDA

(before unallocated head office expenses)

USD 204 million

+33% y-o-y

Navigating unprecedented challenges

Revenue

USD 2,011 million

-23% y-o-y

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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Market overview

The key market factors impacting the perfor-

mance of the Infrastructure and Trading seg-

ment include the availability of Ukrainian Black

Sea ports for export operations, the size of the

grain harvest in Ukraine, and global grain price

dynamics. Additional factors include competi-

tion among grain traders and grain infrastruc-

ture assets, to name a few.

Grain export corridor

Following the termination of the UN-brokered

Black Sea Grain Initiative (BSGI) on 17 July

2023, Russia withdrew its security guarantees

for navigation to Ukraine's deep-sea ports and

launched regular attacks on port and agricul-

tural infrastructure. The BSGI had been crucial

for the export of agricultural products from

Ukraine in FY2023, and its termination posed

a significant financial risk to the Group in

FY2024.

On 16 August 2023, the first vessel departed

from Odesa Port using a temporary corridor

for commercial navigation established by the

Ukrainian Navy. However, the first inbound

vessel did not arrive until 16 September, with

normal shipping traffic only resuming in mid-

October 2023. From October 2023 to June

2024, 43.6 million tons of grain were exported

from Ukraine

, with 76% of this volume

shipped via deep-water routes through the

Black Sea ports.

Grain supply in Ukraine

In FY2024, Ukrainian farmers harvested 58

million tons

of grain, up 11% y-o-y. Although

acreage under grains (corn, wheat, and bar-

ley) decreased by 9% y-o-y to 10 million hec-

tares as farmers shifted toward oilseeds,

strong crop yields (up 14-23% y-o-y) contrib-

uted to the overall increase in crop size. Com-

bined with high carry-in stocks of 8 million

tons, this ensured a robust domestic grain

supply for the FY2024 season.

Despite the closure of Ukrainian Black Sea

ports for export operations from July to mid-

October 2023, Ukraine's grain exports sur-

passed 50 million tons in FY2024, an 8% y-o-

y increase. Ukraine became the third-largest

global exporter in the 2023/24 season, follow-

ing the USA, and Russia, and holding an 11%

market share in global grain trade

Competition among grain traders

Historically, we have competed with estab-

lished multinational trade houses such as

COFCO, Cargill, ADM, Bunge, Louis Dreyfus,

and Glencore, along with numerous local

Three key grains: corn, wheat, and barley. Source: Ministry of Agrarian Policy and Food of Ukraine, Kernel’s analysis.

Three key grains: corn, wheat, and barley. Source: Kernel’s estimates as of October 2024.

Three key grains: corn, wheat, and barley. Source: USDA, as of October 2024.

peers. Over the past two years, many new,

smaller players have entered the grain export

market, swiftly managing trade operations and

gaining market share by utilizing alternative

export routes during turbulent times. In this in-

creasingly competitive landscape, Kernel lev-

erages its extensive infrastructure network

and logistical assets to maintain a competitive

edge.

Global grain prices

FY2024 was marked by significant volatility in

the grain markets, driven by geopolitical fac-

tors, weather conditions, and irregular pur-

chasing activity:

• Russia's withdrawal from the BSGI in July

2023 triggered a sharp price spike due to

concerns over future wheat supplies from

the region. However, Ukrainian exports con-

tinued via Danube ports, albeit at reduced

volumes. At the same time, the market was

flooded with cheap Russian grain following

a second consecutive bumper crop, and the

corn market faced pressure from Brazil's

record corn harvest, leading to a sharp price

decline in August.

• Price stabilization occurred in September

2023, primarily due to short positions held

by funds, ongoing tensions in the Black

Sea, and drought conditions in Australia.

Global grain oversupply intensified again in

October and November as the Ukrainian

maritime corridor reopened and record corn

harvests in Brazil and the U.S. struggled to

find sufficient import demand.

• China's unexpected purchase of U.S. wheat

in late November provided a reprieve from

downward price pressure. However, prices

continued to decline due to overproduction

and weak global demand. The crisis in the

Red Sea increased freight rates, further ex-

acerbating market bearishness and forcing

sellers to lower their prices.

• In March 2024, wheat prices experienced a

significant drop following the cancellation of

0.5 million tons of contracted wheat by Chi-

nese buyers. This cancellation underscored

the ongoing uncertainty in demand and con-

tributed to bearish market sentiment. Sub-

sequent price consolidation was supported

by dry conditions in Brazil and the U.S., rais-

ing concerns about the harvests of safrinha

corn and hard red winter wheat.

• A sharp rally in wheat prices began in the

second half of April 2024, driven by severe

drought conditions in Russia, which height-

ened fears about potential supply short-

ages. However, prices began to decline

again in June ahead of the Northern Hemi-

sphere harvest, as the market anticipated

an abundant grain supply.

……………………………………………………………………..

Top 5 grain exporters from Ukraine in

FY2024

% of total grain export

Source: Ministry of Agrarian Policy and Food of Ukraine, Kernel

10%

Kernel

Louis Dreyfus

Nibulon

ADM

Cargill

……………………………………………………………………..

Grain exports from Ukraine by transport in

FY2024

thousand tons

Source: Ministry of Agrarian Policy and Food of Ukraine, Kernel

66%

23%

10%

Black Sea ports Danube ports

Railway Trucks

50.6

……………………………………………………………………..

Corn and feed wheat prices, FOB Ukraine

USD per ton

Source: Agricensus, Kernel

100

150

200

250

300

350

400

450

Corn Feed wheat

FY2024FY2021 FY2022 FY2023

……………………………………………………………………..

Grain exports by transport mode in FY2024

million tons

Source: Ministry of Agrarian Policy and Food of Ukraine, Kernel

2.5

2.4

2.1

2.5

3.8

5.4

5.3

5.8

5.2

5.5

3.9

Jul-23

Aug-23

Sep-23

Oct-23

Nov-23

Dec-23

Jan-24

Feb-24

Mar-24

Apr-24

May-24

Jun-24

Black Sea ports Danube River ports

Railway Trucks

6.3

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Our business model

The Infrastructure and Trading segment con-

sists of two business arms:

• Grain and sunflower oil export value

chain in Ukraine. This arm comprises inter-

connected business units that form a supply

chain linking Ukrainian farmers to global

markets: silo services, transportation and

logistics assets, export terminals, vessels,

grain origination, and export operations in

Ukraine.

• Avere's global physical and proprietary

trading operations.

Grain export business in Ukraine

Kernel is the leading grain exporter from

the Black Sea region and the largest from

Ukraine. The Group sources grain from local

growers, including its own Farming segment,

and exports it from Ukraine, effectively navi-

gating this low-margin business by leveraging

the following:

• Experienced procurement team with na-

tionwide presence and deep understanding

of local trends and regional peculiarities;

• First-hand access to the unique in Ukraine

own infrastructure – the largest private

silo network, the largest private fleet of grain

railcars, as well as the largest deep-water

grain transshipment capacity in ports and

own vessels;

• Prudent risk management: locking up the

margins by selling grain through forward

contracts in a similar time frame as purchas-

ing it from farmers on the spot market

;

• Client-focused approach: Kernel differen-

tiates itself through strong farmer relation-

ships managed via the IBuyMore CRM sys-

tem and supported by numerous value-

added initiatives:

− Kernel, once a major pre-crop finan-

cier with loan amounts and prepay-

ments to farmers reaching USD 120

million at its peak, suspended this initi-

ative due to the war. However, it was re-

sumed towards the end of the reporting

period, albeit on a smaller scale

− Through the Open Agribusiness initi-

ative, Kernel shares expertise and pro-

vides various services to third-party

farmers operating on a total of 148 thou-

sand hectares of land.

− Kernel also provides advanced IT solu-

tions, such as an electronic document

flow system to streamline paperwork

and Transithub, a virtual truck naviga-

tion solution for logistics providers.

Approximately 2/3 of Kernel’s grain exports

are corn. Wheat is the second-largest export,

accounting for 20-30% annually, with the re-

mainder consisting of barley, soybeans, and

Deviations from such approach may appear during the business disruptions caused by the war in Ukraine.

ISCC certification confirms that corn was produced in an environmentally and socially sustainable way, making it suitable for use in bioethanol production.

Transshipment capacity was revised after the missile attack on 19 July 2023 damaged the terminal’s infrastructure.

rapeseed. Most of the exported grain is used

for feed, but we also export grain for human

consumption (0.8 million tons of food-quality

wheat in FY2024, flat y-o-y) and for bioetha-

nol production (1.6 million tons of ISCC-

compliant

corn exported in FY2024, granting

a price premium over conventional corn).

In FY2024, more than 85% of Kernel’s grain

exports from Ukraine were sold on a CIF/CFR

basis, with Kernel handling sea transportation

to the destination port. FOB sales accounted

for almost 12% of the Group’s export volumes

during the period.

Silo services

Kernel operates the largest private inland

silo network in Ukraine consisting of 28 silos

with a total grain storage capacity of 2.2 million

tons. Our network includes both highly produc-

tive silos capable of loading shuttle trains (54

railcars) in a day, and smaller, less efficient

floor-type storages.

Strategically located in Ukraine’s key grain-

producing regions, these silos provide a full

range of services, including grain intake, dry-

ing, cleaning, storage, and off-loading, serving

both our Farming segment and third-party

farmers. Grain intake starts with wheat in July

and ends with corn in November-December,

enabling seasonal turnover of more than 1.0x

storage capacity.

Beyond standard services, Kernel’s silo net-

work is a critical grain origination tool. It al-

lows procurement teams to acquire grain and

sunflower seeds from within a 100-kilometer

radius, making Kernel a preferred partner for

farmers. This network also strengthens rela-

tionships with farmers and provides valuable

insights into Ukraine’s grain supply.

Transportation and logistics assets

Kernel operates a fleet of transportation and

logistics assets to deliver grain, sunflower oil,

and meal to Ukrainian ports or for inland ex-

ports:

• Grain railcars: Kernel is the largest private

operator of grain railcars in Ukraine, holding

an 11% market share with 3,400 railcars.

These railcars transport grain from Kernel-

owned and third-party silos to transship-

ment terminals. Ownership allows Kernel to

save on lease costs, though railway traction

and infrastructure fees still apply. Since the

war began, 8% of the Group's railcars have

been stuck in Russian-occupied territories,

but the remaining fleet strongly supports ex-

port operations.

• Specialized containers: Kernel owns 100

specialized railway containers for transport-

ing grain and sunflower meal, along with

400 tank containers for sunflower oil.

• Rail flatcars: the Group operates 99

flatcars to transport containers by rail.

• Railway tanks: Kernel has 77 railway tanks

for sunflower oil transportation.

• Vehicles: the Group also owns 26 tanker

trucks for sunflower oil and 77 trucks with

trailers for grain transport.

Export terminals

Kernel is one of the largest port operators

in Ukraine, with infrastructure that includes:

• TransBulkTerminal in the deep-water port

of Chornomorsk, the largest grain trans-

shipment facility in Ukraine with a capac-

ity to handle 8.0

million tons of grain per

annum. It is capable of servicing over-Pan-

amax vessels with deadweights of up to

100,000 tons and maximum berth loading of

up to 80,000 tons. As a core asset for Ker-

nel, it is critical for handling the Group’s ex-

ports, with no viable alternative for this ca-

pacity.

• TGT-Oil terminal in Chornomorsk port,

………………………………………………………………………………………………………………

Kernel grain export from Ukraine destina-

tions

million tons

………………………………………………………………………

Kernel grain export from Ukraine

million tons

52%

40%

Europe Asia Middle East Other

5.5

69%

61%

77%

63%

26%

23%

21%

17%

30%

7.9 8.0 8.0

3.7

5.5

FY2020 FY2021 FY2022 FY2023 FY2024

Corn Wheat Other

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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acquired in July 2023, with a sunflower oil

transshipment capacity of 1.4 million tons

per year and storage capacity of 97 thou-

sand tons. It is a Group’s core asset for sun-

flower oil loading to vessels.

• OilExportTerminal in the deep-water port

of Pivdennyi, with an annual capacity to

transship 0.5 million tons of sunflower oil.

• Reni-Oil terminal in the port of Reni on the

Danube River, acquired in FY2024, with a

capacity of 700 thousand tons of sunflower

oil annually.

• Danube Prom Agro terminal in the river

port of Reni, allowing to export of 0.4 million

tons of grain/sunflower meal per annum.

Kernel’s terminals primarily handle grain (75%

of total throughput in FY2024), along with sun-

flower meal and oil.

The Group also has transshipment agree-

ments with port facilities in Romania and the

Netherlands to support export operations.

Vessels

Kernel owns and operates the bulk carrier Rot-

terdam Pearl V with a grain cargo capacity of

50 thousand tons and the tanker Mavka with a

sunflower oil cargo capacity of 12.5 thousand

tons. The Group also owned the bulk carrier

Eneida (44 thousand tons of grain cargo ca-

pacity), which was sold in April 2024.

By controlling the entire value chain – from si-

los to railcars, port terminals, and vessels –

Kernel enhances efficiency and reduces ex-

port logistics costs.

Avere operations

Founded in FY2018, Avere is a 100%-owned

subsidiary of Kernel, headquartered in Swit-

zerland with representative offices in the USA,

Singapore, the Cayman Islands, Australia,

Brazil, the UK, and China. Avere’s team of 39

professionals specializes in research, trading,

and execution. It focuses on merchandising

and proprietary trading of grains, oilseeds, and

related commodities in key global markets, op-

erating independently of Kernel’s Ukrainian

operations.

Due to its trading nature, Avere’s financial re-

sults can be volatile. Market risk is managed

through various tools, including:

• Drawdown: Monitoring the difference be-

tween the most recent peak and trough in

market value.

• Value-at-Risk: Managing the maximum po-

tential loss over one day with 95% confi-

dence.

Key developments

War impact

The Infrastructure and Trading segment is sig-

nificantly affected by the war in Ukraine, as its

performance heavily depends on the availabil-

ity of Ukrainian Black Sea ports for exports.

With these ports blocked, viable alternatives

for exporting grain are limited. Inland exports

or exports via Danube River ports lack capac-

ity and are associated with higher costs, ren-

dering export operations unprofitable.

The Black Sea Grain Initiative, which was in

place for most of FY2023 and allowed us to

substantially reduce stock levels, was unilater-

ally terminated by Russia on July 17, 2023, at

the beginning of FY2024. Our grain export vol-

umes dropped to as low as 10 thousand tons

per month in July 2023, with no clarity on when

exports would recover.

What followed clearly demonstrates the terror-

istic nature of the regime in Russia, which

launched a series of attacks on Ukrainian port

infrastructure, also damaging Kernel's assets:

• July 19: A missile attack on the port of

Chornomorsk targeted our TransBulkTermi-

nal, damaging storage facilities, intake ca-

pacities, and loading equipment, and result-

ing in the loss of commodity inventories. We

lost 136 thousand tons of storage capacity

out of 480, and 2 million tons of annual

transshipment capacity.

• July 24: Another missile attack targeted the

Reni port, causing damage to our vegetable

oil transshipment terminal. We lost 6 thou-

sand tons of storage capacity, and railway

intake capabilities and piping equipment

were damaged.

• August 6: A major missile strike hit one of

our largest inland silos in the Khmelnytskyi

region, destroying 21 thousand tons of stor-

age and truck unloading equipment. Addi-

tionally, 44 thousand tons of storage, drying

facilities, and administrative buildings sus-

tained substantial damage.

• August 16: Russian drones severely

…………………………………………………………………………………………………………………………………………………………

Repair works at the Group’s TransBulkTerminal in the port of Chornomorsk following dam-

age from a Russian missile attack in July 2023

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damaged all grain storage facilities belong-

ing to our grain transshipment terminal at

the Reni port.

• September 2: Russia targeted key Danube

port infrastructure in Ukraine, vital to the op-

erations of our subsidiaries involved in sun-

flower oil exports from the region.

• September 3: Russian forces attacked

grain flat storages operated by a port oper-

ator in the Danube region, which provided

crucial grain transshipment services to Ker-

nel.

• September 6: Another strike occurred, im-

pacting our assets in the Danube ports,

among other sites.

While the intensity of attacks reduced starting

from October 2023, periodic strikes continued,

affecting civilian vessels, transshipment facili-

ties, and railway infrastructure.

• In April 2024, missile assaults on transport

infrastructure near the port of Chornomorsk

halted railway deliveries entirely. Our grain

and sunflower oil transshipment assets in

Chornomorsk rely heavily on railway intake,

and the attack significantly impacted termi-

nal throughput and increased logistics

costs.

• Toward the end of the financial year, two of

our elevators in the Poltava region were

damaged due to missile attacks, destroying

administrative buildings, silos, locomotives,

and railcars.

Following damage assessments, we recog-

nized an impairment loss on property, plant,

and equipment totaling USD 11 million. Inven-

tory write-offs amounted to USD 2.8 million,

with USD 1.5 million attributed to losses in ed-

ible oil and the remainder to grain. Preliminary

assessments indicate that restoring and reha-

bilitating damaged or destroyed equipment will

require a minimum capital expenditure of USD

28 million. While some reconstruction could be

deferred, immediate renovation was neces-

sary since the grain harvesting season was in

full swing.

In the autumn of 2023, the Ukrainian Navy

secured a new export corridor – a highly un-

expected and fortunate development for the

Company. Normal shipping traffic resumed by

mid-October after a pause in Russian attacks

on port infrastructure, restoring business con-

fidence in exporting goods through the Black

Sea ports. This turnaround provided a critical

boost to Kernel's operations amid the ongoing

conflict. From October to December 2023,

Kernel exported 1.7 million tons of grain, a sig-

nificant recovery from the 0.2 million tons ex-

ported in Q1 FY2024. Over the remaining pe-

riod of FY2024, the new export corridor func-

tioned relatively well, allowing Kernel to export

all produced goods. However, periodic Rus-

sian attacks continued to target port infrastruc-

ture and vessels, posing significant risks to

Kernel’s operations.

Strengthening the asset base

With the realization that the Black Sea Grain

Initiative would not be extended, we urgently

needed to secure sunflower oil transshipment

capacity via the Danube River. In July 2023,

we agreed to acquire 100% of the corporate

rights in Reni-Oil LLC – a sunflower oil trans-

shipment terminal with 15,000 tons of one-

time sunflower oil storage at the Reni port – for

USD 24.75 million. This terminal is the only fa-

cility among Ukrainian Danube River ports

with proper intake, storage, and off-loading ca-

pacities, enabling the export of sunflower oil

even if the Black Sea ports are blockaded. The

deal was completed by the end of December

2023.

Additionally, to strengthen the resilience of our

oilseed processing business – the Group's

major earnings driver – we acquired vegeta-

ble oil transshipment assets in the port of

Chornomorsk in July 2023 for USD 19.4 mil-

lion. This facility offers a one-time sunflower oil

storage capacity of 97 thousand tons. In the

event of a Black Sea blockade, these addi-

tional storage facilities would enable us to

keep our crushing plants operational during

transportation disruptions, as experienced

heavily in FY2022–FY2023, thereby smooth-

ing our logistics. If the Black Sea remains open

for export operations, the facility becomes cru-

cial for sunflower oil transshipment, allowing

us to shift away from relying on third-party ca-

pacities and improving supply chain efficiency.

Historically inactive and inadequately main-

tained, the terminal required rehabilitation. In

Q2 FY2024, we allocated an additional USD

2.3 million for its restoration and preparation

for operations. The facility became functional

in January 2024, and we began transshipping

sunflower oil. Now called TGT-Oil, it has an

annual transshipment capacity of 1.4 million

tons and serves as a vegetable oil transship-

ment and trading hub. It offers transshipment

services to third parties and allows Kernel to

procure sunflower oil on a CPT basis for fur-

ther exports.

To further bolster Kernel’s transportation and

logistics capabilities, the Group acquired a

bulk carrier Rotterdam Pearl V with a grain

cargo capacity of 50,000 tons for USD 15.7

million in December 2023. In April 2024, amid

an improved market climate in Ukraine and the

stabilization of deep-water exports, we de-

cided to divest one of our bulk carrier ves-

sels, Eneida, due to its diminished im-

portance for our export operations. The cash

consideration received was USD 7.4 million.

In FY2024, the Group also completed several

divestments of old, outdated, and inefficient

grain storage facilities:

• In September 2023, we divested a floor-

type grain silo located in the Kharkiv region

for a cash consideration of USD 1.1 million.

• In June 2024, we divested two grain storage

facilities in the Poltava region for a cash

consideration of USD 1.7 million.

Headcount

As of June 30, 2024, the headcount of the

Infrastructure and Trading segment in-

creased by 6% year-on-year to 2,894 employ-

ees. The new hires are primarily associated

with staffing the Group’s newly acquired ex-

port terminals in Chornomorsk and Reni.

Performance overview

Operational performance

Grain export from Ukraine

Kernel began the season with 1.1 million tons

of grain in carry-in stock – significantly above

the pre-war average of 250–300 thousand

tons but below the 1.8 million tons at the start

of the previous season. When the Black Sea

was inaccessible for exports in Q1 FY2024,

we managed to export only 0.2 million tons of

grain between July and September 2023.

However, as the season progressed, the

…………………………………………………………………………………………………………………………………………………………………………………………………………………………………………

Kernel grain export from Ukraine by transportation mode

thousand tons

Source: Kernel

100

200

300

400

500

600

700

800

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

FY2023 FY2024

Black Sea ports Danube River ports Other

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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Ukrainian Navy established a temporary corri-

dor to the Black Sea ports, revitalizing export

logistics by mid-October. This allowed Kernel

to resume quarterly export volumes of 1.6–1.9

million tons in Q2–Q4 FY2024, although still

below the pre-war quarterly maximum of 3.5

million tons.

In FY2024, the Group exported 5.5 million

tons of grain, up 47% y-o-y, driven by well-

functioning Black Sea export routes for most

of the season. Corn made up 63% of the total

exported volume, wheat accounted for 30%,

and the remainder consisted of barley and

other crops. More than half of Kernel's grain

exports in FY2024 were produced by our

Farming segment, with the remainder sourced

from third-party farmers as we resumed pro-

curement activities. During the reporting pe-

riod, we procured 3.3 million tons of grain from

other farmers, up 3.3x y-o-y though still below

pre-war levels. By season's end, our grain in-

ventories stood at 0.4 million tons, close to

pre-war norms.

Nearly 80% of the exported grain volume was

transshipped through our grain terminal in

Chornomorsk, with the remainder delivered

via Danube ports.

Thanks to the reopening of Ukrainian deep-

water Black Sea ports and the team's efforts,

Kernel's market share in grain exports in-

creased to 10% in FY2024, up from 8% in the

previous season, maintaining its position as

Ukraine’s largest grain exporter. We ac-

counted for 12% of Ukraine's corn exports, 9%

of wheat, and 7% of barley.

Export terminals throughput

During the reported period, Kernel trans-

shipped 6.7 million tons of goods (grain,

sunflower meal, and sunflower oil) through its

port facilities, marking a 51% y-o-y increase.

This growth was primarily driven by the reo-

pening of export routes through deep-water

ports in Q2 FY2024 and the commencement

of vegetable oil transshipment operations in

Q3 FY2024 at newly acquired terminals in

Reni and Chornomorsk, which together con-

tributed 0.6 million tons of sunflower oil trans-

shipped. Grain accounted for 75% of the total

transshipped volume in FY2024, edible oil

This volume is included in the export terminal’s throughput total figure.

made up 12%, and meal comprised the re-

mainder.

Starting in FY2024, the Group began offering

transshipment services to third parties to im-

prove terminal capacity utilization, handling a

total of 486 thousand tons of third-party-

owned grain

Grain and oilseeds received in inland silos

The volume of grain received in inland silos

in FY2024 amounted to 2.8 million tons, re-

maining flat y-o-y. Of this total, 1.9 million tons

were produced by the Group's own Farming

segment, with an additional 122 thousand tons

procured by the Group. The remaining volume

was supplied by third-party farmers who uti-

lized the Group's storage and drying capaci-

ties.

The primary grains received were corn and

wheat. Corn deliveries totaled 1.3 million tons,

a 34% decline y-o-y, while wheat volumes

doubled y-o-y to 0.8 million tons. The rest of

the intake consisted of sunflower seeds, soy-

beans, and rapeseed.

Financial results

The Infrastructure and Trading segment deliv-

ered USD 204 million in EBITDA in FY2024,

marking a 33% y-o-y increase. Of that, Avere’s

trading business contributed USD 53 million in

EBITDA (a 40% increase y-o-y), and the grain

and sunflower oil export value chain in Ukraine

generated USD 151 million in EBITDA (a 30%

increase y-o-y).

Key performance drivers within the grain and

sunflower oil export value chain in Ukraine

were as follows:

• Export terminals achieved an EBITDA of

USD 43 million, up 24% y-o-y, driven by

growth in transshipment volumes and mar-

ket transshipment rates. This result also in-

cludes a USD 47 million impairment loss

recognized in FY2024.

• Unlike the previous reporting period, when

high logistics costs nearly wiped out trading

margins, grain origination and trading op-

erations were profitable this year, generat-

ing USD 54 million in EBITDA.

• Railcars business saw its EBITDA decline

significantly to USD 22 million from USD 72

million in FY2023. The drop was primarily

due to a 56% y-o-y reduction in market

lease rates for grain railcars, caused by an

increase in the number of wagons available

for grain transportation in Ukraine.

• Our own fleet of vessels contributed USD

12 million in EBITDA by transporting 475

thousand tons of grains and 219 thousand

tons of oil. This business line did not con-

tribute in FY2023.

• Due to a lack of rain during the harvesting

period, demand for grain drying services de-

creased. Consequently, the silo services

business line generated an EBITDA of

USD 20 million, down 59% y-o-y.

FY2025 outlook

Grain supply for exports from Ukraine

Unlike the previous two seasons, when strong

harvests and carry-over stocks ensured suffi-

cient domestic grain supply, the grain export

surplus in Ukraine is a major concern for the

Group in FY2025. We estimate that FY2025

grain exports (corn, wheat, and barley) will de-

cline by 10.8 million tons y-o-y, down 22%.

This reduction is roughly split equally between

the impact of lower harvests and reduced

carry-in stocks.

While weather conditions have been largely

favorable for winter crops, insufficient rainfall

has negatively impacted spring crop yields.

Corn yield is projected to decline by 22% y-o-

y, despite stable planted areas of around 4 mil-

lion hectares. As a result, the total grain har-

vest is expected to reach 52 million tons, down

11% y-o-y.

Signs of low grain supply are already visible in

the first half of the season, with slow farmer

selling driving prices higher. Unlike previous

seasons, farmers feel less pressure to sell and

have more silo capacity to store grain, opting

to wait for better prices. The bargaining power

is shifting from traders to farmers. A low supply

………………………………………………………………………

Infrastructure and Trading segment EBITDA

USD million

180

111

115

116

151

248

122

216

359

237

154

204

FY2020 FY2021 FY2022 FY2023 FY2024

Avere Ukraine

…………………………………………………………………………………………………………………………………………………………

Infrastructure and Trading segment performance

FY2023

FY2024

y-o-y

Grain export volumes

thousand tons

3,705

5,452

47%

Export terminal's throughput (Ukraine)

thousand tons

4,433

6,700

51%

Grain received in inland silos

thousand tons

2,825

2,801

(1%)

Revenue

USD million

2,602

2,011

(23%)

EBITDA

USD million

154

204

33%

EBITDA margin per ton of grain exported

USD

(10%)

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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of grain will impact both margins across the

entire value chain (storage, logistics, trans-

shipment), but also will result in underutilized

transshipment capacities in the second half of

the season.

War impact

Despite a reduction in the intensity of Russian

attacks on Ukraine's port infrastructure, these

attacks continue periodically. For instance, in

September 2024, a missile strike targeted a ci-

vilian vessel carrying Ukrainian wheat to

Egypt. Later, another attack on transport infra-

structure near the port of Chornomorsk dam-

aged railcars and resulted in the loss of grain.

In October 2024, a Russian drone attack tar-

geted Ukraine’s port infrastructure, causing

damage to the Group’s assets at the port of

Chornomorsk, among others. These actions

highlight two major risks for the Group:

• The potential damage or destruction of the

Group's core port assets, disrupting export

operations.

• The risk of Russia reinstating a blockade on

Ukrainian Black Sea ports by regularly at-

tacking civilian vessels.

…………………………………………………………………………………………………………………………………………………………

Damaged silos in the Khmelnytskyi region following a Russian missile attack in August 2023

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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Farming

Management

Report

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Corporate

Governance

Financial

Statements

FY2024 posed significant challenges for Kernel’s

Farming segment, characterized by resilience amidst

a volatile geopolitical environment. The segment's

performance was heavily influenced by the fluctuat-

ing accessibility of export routes through Ukrainian

Black Sea ports. The year began with severe disrup-

tions, as the ports remained closed, hindering export

activities and placing the business in a difficult posi-

tion during the first quarter. Russian attacks on infra-

structure and export routes, combined with logistical

constraints and high carry-over stocks, resulted in

losses early in the year.

However, starting in October 2023, the reopening of

Ukrainian Black Sea ports by the Ukrainian Navy

marked a pivotal shift. With export routes reestab-

lished, Kernel rapidly increased its export activities,

lowering inventory levels and stabilizing operations.

This regained export capacity enabled the segment

to continue selling grain and oilseeds despite chal-

lenging market conditions. Throughout FY2024, the

segment realized 2.3 million tons of agricultural

products, including 0.7 million tons of carry-over

stock from the previous season, effectively destock-

ing – especially considering the record crop yields for

corn and wheat from the 2023 harvest.

Segment EBITDA reached USD 171 million, a 23%

decline y-o-y, largely due to lower global prices for

grain and oilseeds. However, the profitable sale of

the previous year's crop provided a significant boost,

contributing nearly half of the segment's EBITDA.

Record crop yields were a positive surprise, but stor-

age capacity limitations during the harvest season,

compounded by blocked sales channels, led to grain

losses due to quality deterioration because of im-

proper storage.

FY2025 outlook

Looking ahead to FY2025, both positive and nega-

tive factors are likely to influence the segment's

performance. On the positive side, a decline in 2024

crop production costs and an anticipated rise in

prices provide a potential upside. Conversely, lower

crop yields from the 2024 harvest and reduced carry-

over stocks from the previous year will limit the grain

and oilseed supply available for sale. The stability of

the Black Sea export routes remains a critical risk

factor – any renewed disruptions or increased risk

premiums could hamper exports and increase logis-

tics costs, directly affecting profitability.

In this uncertain context, Kernel’s strategic focus will

be on maintaining operational resilience, optimizing

costs, and ensuring flexibility to adapt swiftly to

changing market and geopolitical conditions. The

path forward requires a careful balance between

managing risks and seizing opportunities, with an

unwavering focus on sustaining profitability amidst

ongoing challenges.

Revenue

USD 481 million

-31% y-o-y

EBITDA

(before unallocated head office expenses)

USD 171 million

-23% y-o-y

Produced 1.8 million

tons of corn, wheat,

soybean and sun-

flower in FY2024

Managing one of the largest farmland banks in

Ukraine

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Farming continued

Management

Report

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Corporate

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Financial

Statements

Our business model

Large-scale farming

Kernel is one of the largest crop producers in

Ukraine. As of 30 June 2024, the total area of

leasehold farmlands under Kernel’s opera-

tions amounted to 358 thousand hectares,

including 332 thousand hectares under 2024

crops to be sold, 6 thousand hectares of land

under seeds and crops grown for in-house use

(cattle business), and 20 thousand hectares of

fallow land

. In FY2024, we harvested 1.8 mil-

lion tons of corn, wheat, sunflower seeds, and

soybeans.

We operate in the central and northern regions

of Ukraine with highly fertile “chornozem”

black soils and sufficient precipitation. Our

land bank is divided into five production clus-

ters, each with a decentralized operational de-

cision-making structure that enables rapid re-

sponses to external factors. The central office

is responsible for shaping our overall business

strategy, procuring key inputs, and overseeing

operations. A spirit of healthy competition

among these clusters promotes ongoing effi-

ciency enhancements.

Except for 2,884 hectares of irrigated land

used for in-house seed production, all our

farmland is rain-fed, with all the associated

weather risks.

We adhere to a simple crop mix dominated

Part of this fallow land (13 thousand hectares), located near the hostilities and the Russian border, was subleased to local farmers.

The Group substantially deviated from such an approach in FY2023 and in FY2024, when the share of sunflower seeds in the acreage substantially increased, and

the Group re-introduced soybeans in the crop mix. However, such crop mix is not sustainable, and we will revert to our normal crop rotation practice in 2-3 years.

by corn and sunflower, covering in total of

80-85% of our farmland bank, and the remain-

ing percentage stands for wheat, rapeseed,

soybean, and other minor crops

The Farming business is characterized by a

long working capital cycle (~18 months), as

illustrated in the “FY2024 crop production cy-

cle” graph below.

Leasehold land operations

Approximately one-quarter of Ukraine's agri-

cultural land is held by the state, municipali-

ties, and state-owned companies. The remain-

ing 75% consists of small land parcels, rang-

ing from 1 to 10 hectares depending on the re-

gion, owned by private individuals who ac-

quired these rights during the land distribution

process in the 1990s following the collapse of

the Soviet Union.

For the past two decades, all farmland in

Ukraine has been subject to a moratorium,

preventing its sale. Initially implemented in

2001, this moratorium has been repeatedly

extended by the parliament, impeding the

growth of the farming sector in Ukraine. Con-

sequently, agricultural producers lease land

from current owners, with new lease agree-

ments since 2015 having a minimum term of

seven years to ensure the stability of farmers'

business operations. The farmland market fi-

nally opened on 1 July 2021, albeit with

……………………………………………………………...………

Kernel’s farmland lease rights maturity

as % of total landbank

FY2024 crop production cycle

FY2023

FY2024

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar-Jun

Corn

Land preparation

Fertilization

Planting

Plant protection

Harvesting

Selling

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar-Jun

Sunflower

Land preparation

Fertilization

Planting

Plant protection

Harvesting

Selling

Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

July

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar-Jun

Winter wheat

Land preparation

Fertilization

Planting

Plant protection

Harvesting

Selling

16%

44%

27%

< 5 years 5-10 10-15 15-20 > 20

years

………………………………………………………………………………………

Kernel’s production of key crops

thousand tons

1,975

2,032

2,360

1,324

853

473

449

469

332

337

569

357

395

161

403

187

3,078

2,841

3,234

1,836

1,780

FY2020 FY2021 FY2022 FY2023 FY2024

Corn Sunflower Wheat Soybean

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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Farming continued

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several restrictions. The most significant of

these

restrictions include:

• Ukrainian citizens initially were permitted to

acquire agricultural land, but individual own-

ership was limited to a maximum of 100

hectares.

• Starting from 1 January 2024, also Ukrain-

ian-incorporated legal entities became al-

lowed to purchase agricultural land, and the

ownership cap increased from 100 hectares

to 10,000 hectares for both private individu-

als and legal entities.

• Foreign individuals and corporations, as

well as legal entities with foreign sharehold-

ers under the Law of Ukraine, are prohibited

from purchasing land unless a nationwide

referendum decides otherwise.

Kernel leases all the land under operation,

with lease contracts having an average ma-

turity of 13 years. All lease contracts include

the right of first refusal to prolong leases or to

buy the land in case of being allowed to do so.

We've secured the use of 15,000 hectares of

land through long-term land lease agree-

ments, extending up until the year 2118.

These agreements, known as 'emphyteusis'

leases, involve making a single lump-sum

payment of all rent to the lessor at the agree-

ment's signing. This approach enables us to

ensure the continuity of our operations for an

extended duration, well beyond the scope of

typical farmland lease contracts.

Private individuals own 88% of the landbank

that we lease, and 12% is owned by the state.

Despite all the Group’s efforts to maintain the

integrity of its landbank, some landowners

prefer not to extend the lease agreements,

and as a result the Group naturally loses part

of its farmland bank, in the range of 1-2% each

year.

Starting from FY2020, land lease expenses

are not accounted for among operating ex-

penses thus impacting segments EBITDA, but

are reflected as amortization of rather as

amortization of right-of-use assets and finance

expenses attached to lease liabilities.

Performance overview

The performance of Kernel’s Farming seg-

ment in FY2024 heavily depended on the

availability of the Black Sea as a primary ex-

port route for the Group's agricultural produce.

The year began with a complete blockade of

the Black Sea, resulting in a challenging first

quarter. However, from October 2023 onward,

Ukrainian Black Sea ports reopened, allowing

for the export of all available goods, which sig-

nificantly improved the business environment.

As a result, the Farming segment sold 2.3 mil-

lion tons of grains and oilseeds in FY2024, in-

cluding 0.4 million tons of sunflower seeds and

rapeseeds processed in Kernel's oilseed

plants and 1.9 million tons sold for export.

These sales included 702 thousand tons of

corn and wheat from carry-over stocks of the

2022 crop.

Sales prices in FY2024 declined for all crops

compared to the previous year. While lower lo-

gistics costs provided some relief, the overall

impact on the Farming segment’s

performance appeared to be significantly neg-

ative.

EBITDA of the segment reached USD 171

million, a 23% decline y-o-y, influenced by

several factors:

1. USD 85 million in EBITDA from the sale

of the 2023 crop.

The crop mix for 2023 was adjusted to reduce

dependence on energy- and logistics-inten-

sive corn, focusing on more sustainable alter-

natives like soybeans and winter wheat:

• Corn acreage decreased by 44% y-o-y to

84 thousand hectares, despite the initial

plan to leave 50 thousand hectares of this

land fallow due to uncertainties with export

capabilities.

• Sunflower acreage decreased to 120 thou-

sand hectares, accounting for 33% of the to-

tal crop mix, down 8% y-o-y. Despite the re-

duction, sunflower remained the largest

crop, important for supporting the Group’s

oilseed processing operations.

• Winter wheat acreage expanded signifi-

cantly to 61 thousand hectares, a 75% in-

crease y-o-y.

• Soybeans were reintroduced into the crop

mix, covering 65 thousand hectares. This

proved to be a sound decision, as soybeans

emerged as the most profitable crop within

………………………………………………………………………...........................................................................................................................

FY2024 harvest results

Acreage

thousand ha

Net crop yields

tons / ha

Harvest size

thousand tons

FY2023

FY2024

y-o-y

FY2023

FY2024

y-o-y

FY2023

FY2024

y-o-y

Corn

150

(44%)

8.8

10.1

14%

1,324

853

(36%)

Sunflower

131

120

(8%)

2.5

2.8

10%

332

337

Wheat

75%

4.6

6.6

43%

161

403

2.5x

Soybean

10x

2.9

187

10x

Other

(32%)

363

359

(1%)

1,836

1,780

(3%)

Note 1

One ton per hectare equals 15.9 bushels per acre for corn and 14.9 bushels per acre for wheat and soybean.

Note 2

For the four main crops: corn, sunflower and wheat.

Note 3

Includes pea, rapeseed, barley, forage crops and other minor crops, as well as land left fallow for crop rotation purposes.

Part of this fallow land (13 thousand hectares), located near the hostilities and the Russian border, was subleased to local

farmer

………………………………………………………………………………………

Kernel’s acreage harvested by crops

thousand hectares

45%

51%

41%

24%

27%

30%

31%

36%

33%

19%

15%

13%

10%

17%

13%

26%

513

501

499

363

359

FY2020 FY2021 FY2022 FY2023 FY2024

Corn Sunflower Wheat Other

…………………………………………………………………………………………………………………………………………………………………………………………

Kernel’s crop yields

tons per hectare

8.5

8.0

9.3

8.8

10.1

5.9

4.9

6.1

4.6

6.6

3.5

3.0

2.5

2.8

2.5

1.2

2.0

2.9

FY2020

FY2021

FY2022

FY2023

FY2024

Ukraine

Corn Wheat Sunflower Soybean

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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Farming continued

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the Farming portfolio.

We benefited from record crop yields for

corn and wheat, reaching 10.1 and 6.6 tons

per hectare, respectively – marking a 14% and

43% y-o-y increase. This improvement was

largely due to consistently favorable weather

conditions throughout the season, despite a

reduced level of fertilizers applied due to local

shortages of some crop inputs. Sunflower

yields also increased by 10% y-o-y to 2.8 tons

per hectare, while soybean yields remained

stable at 2.9 tons per hectare. As a result, Ker-

nel harvested 1.8 million tons of grain and

oilseeds, with 1.6 million tons sold in FY2024

and 132 thousand tons of corn and wheat car-

ried over as stock for FY2025.

Our costs per hectare decreased by 7% y-o-

y on average, mainly due to savings on silo

grain drying services, as the harvested corn

had a low moisture content because of dry

weather before harvesting. However, we

faced inflation in the costs of fertilizers and

crop protection agents, alongside increases in

payroll and growth in repairs and maintenance

costs, as we postponed investments in up-

grading our machinery and vehicle fleet due to

the war in Ukraine.

Logistical constraints early in the season,

combined with large carry-in stocks and rec-

ord crop yields, limited our silo storage capac-

ity, forcing us to use flexi bags for grain stor-

age. This storage method led to quality deteri-

oration, resulting in a loss of ~30 thousand

tons of corn out of 459 thousand tons of grain

and oilseeds stored this way in FY2024.

2. USD 82 million in EBITDA from the sale

of the 2022 crop.

In FY2024, we sold 702 thousand tons of corn

and wheat from carry-over stocks of the previ-

ous season. It was a relatively low-cost good,

as due to price fluctuations in FY2023 Kernel

had already written it to a net realizable value

of below actual cost. However, as we sold this

grain in FY2024 at improved prices, the write-

downs from the previous year contributed to

profits in FY2024.

3. USD 10 million loss from the net

change in the fair value of biological

assets and agricultural produce, com-

pared to a USD 115 million loss a year

ago, reflecting lower price volatility in

FY2024.

4. USD 14 million from other impacts, in-

cluding a USD 8 million reversal of

For the 2025 harvest, the acreage under sunflower is planned to decrease further, to 12% of the total land bank (40 thousand hectares). After this reduction, we aim

to gradually return to sustainable levels of around 25% of total acreage in subsequent years, aligning with long-term crop rotation practices.

previously recognized impairments.

It is important to note that, as required by IFRS

16, farmland lease costs are not included

in the segment’s EBITDA. Instead, they are

presented as lease interest payments (dis-

closed under finance costs) and repayments

of lease liabilities (disclosed under cash used

in financing activities). In FY2024, these pay-

ments totaled USD 45 million.

The segment’s earnings translated into USD

476 EBITDA per hectare, with 359 thousand

hectares in operation in FY2024.

The headcount of the Farming segment re-

mained relatively unchanged y-o-y, with 4,527

employees as of 30 June 2024.

FY2025 outlook

Several key factors will influence the perfor-

mance of the Farming segment in FY2025:

• Availability of Ukrainian Black Sea ports

for exports;

• Lower Crop Size: The 2024 crop size is ex-

pected to be lower y-o-y, primarily due to re-

duced crop yields caused by unfavorable

weather conditions.

• Minimal Carry-Over Stock: Unlike the pre-

vious year, we will have minimal carry-over

stock to supplement sales volumes.

• Higher Sales Prices: Sales prices for most

crops are anticipated to increase y-o-y,

which could positively impact revenue, alt-

hough the sustainability of this trend re-

mains uncertain.

• Reduced Production Costs: Production

costs are expected to decrease, driven by

lower expenses in grain drying due to low

rainfall during the harvesting of spring

crops.

Further details on these factors are provided

below.

Availability of Ukrainian Black Sea

ports for exports

Since October 2023, we have benefited from

relatively stable export operations through

Ukrainian Black Sea ports, and the stability of

these routes remains crucial for Kernel. Any

disruptions, such as Russian attacks on the

Group’s port assets or strikes on civilian ves-

sels, could lead to a renewed blockade or a

sharp increase in risk premiums and logistics

costs, affecting navigation and the profitability

of the entire export value chain. Any such dis-

turbances would ultimately be absorbed into

the farming business’s profitability. Thus, the

accessibility of these ports is essential for effi-

cient grain exports, directly impacting sales

volumes, logistics costs, and the overall per-

formance of the Farming segment.

Harvest size 2024

For the 2024 crop (planted in FY2024 and to

be sold in FY2025), the Group adjusted its

crop structure to reestablish sustainable

farming practices and crop rotation, which had

been disrupted by Russia's invasion of

Ukraine:

• Sunflower acreage was reduced by 44% y-

o-y, to 67 thousand hectares, representing

19% of the total acreage, down from the el-

evated levels of 33-36% seen in 2022-2023.

These higher levels marked a deviation

from normal crop rotation practices, which,

if extended over time, could lead to reduced

yields due to increased risks of pests and

diseases. However, maintaining such a high

percentage of sunflower acreage in 2022-

2023 was necessary given the uncertainties

surrounding grain export logistics capacity

at that time

• The acreage under corn remained virtually

unchanged, at 87 thousand hectares.

• Kernel expanded the winter wheat acreage

to 93 thousand hectares, a 52% y-o-y

………………………………………………………………………………………

Profitability dynamics

USD million

………………………………………………………………………………………

Realized crops produced by Farming

thousand tons

604

657

635

695

481

134

461

219

221

171

22%

70%

35%

32%

35%

FY2020 FY2021 FY2022 FY2023 FY2024

Revenue EBITDA

EBITDA margin, %

65%

69%

67%

61%

62%

17%

12%

16%

10%

15%

13%

18%

15%

27%

14%

3,237

2,966

2,320

2,497

2,311

FY2020 FY2021 FY2022 FY2023 FY2024

Corn Wheat Sunflower

Soybean Rapeseeds Other

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Farming continued

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increase, making up 26% of the total acre-

age. This is the highest proportion of wheat

in the Group’s crop structure since 2012.

• The Group increased plantings of soybeans

and rapeseeds to 72 thousand hectares and

14 thousand hectares, respectively, driven

by the strong profitability of oilseeds in

FY2024.

As of the date of this report, the harvesting of

all crops, except for corn, is complete, with

crop yields showing a decline across most

crops due to severe drought conditions in

Ukraine during critical grain filling and matura-

tion periods. Corn yields declined by 17% y-o-

y to 8.4 tons per hectare (based on 98% of the

acreage harvested), wheat by 8% y-o-y to 6.1

tons per hectare, soybeans by 24% y-o-y to

2.2 tons per hectare, rapeseeds by 27% y-o-y

to 2.4 tons per hectare. Sunflower yields

showed greater resilience, with yields remain-

ing stable in our operating regions, despite

more severe drought impacts in other crop-

producing areas of Ukraine

. The drought had

a particularly adverse effect on the growth and

overall production of corn and soybeans.

As a result, the total crop size for 2024 is pro-

jected to be lower than the previous year.

At the start of FY2025, the Group expanded its

land bank by acquiring an agricultural enter-

prise with lease rights over 3.6 thousand hec-

tares. This acquisition aligns with the Group’s

strategy to maintain the integrity of its land

These are preliminary data; the final crop yields will be published at later stage.

bank, offsetting the natural loss of land due to

the non-renewal of lease agreements by land-

owners.

Carry-over stock

As of 30 June 2024, the Farming segment held

a total of 147 thousand tons of carry-over

stock from the 2023 crop, consisting of 70

thousand tons of wheat and 62 thousand tons

of corn, with the remainder primarily made up

of soybeans and other crops.

Prices

In FY2025, prices have limited downside po-

tential and are anticipated to improve y-o-y for

all crops except soybeans, which already ben-

efited from high price levels in FY2024. The

upward trend in prices is evident at the begin-

ning of the season, though it remains uncer-

tain how sustainable this increase will be over

time.

Production costs

We anticipate a 12% y-o-y decrease in pro-

duction costs for the 2024 crop, driven mainly

by a reduction in per-hectare costs for corn

and wheat, down by 21% and 15%, respec-

tively. This decrease is largely due to lower ex-

penses for grain harvesting and delivery

driven by lower crop yields and lower cost of

silo services, as the dry conditions during har-

vesting reduced grain moisture levels, leading

to lower drying costs.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Risk management

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Risk management system

The Group’s management defines risk as an

event, action, or lack of action, which can lead

to failure to achieve the Company’s objectives.

Kernel has an evolving system of risk man-

agement aimed at preserving the stability

and solvency of the Company under ex-

treme conditions to secure long-term sus-

tainable value for shareholders.

Based on the Risk Management Policy

(adopted by the Board of Directors in Novem-

ber 2018) and underlying policies and proce-

dures, Kernel monitors and assesses its risk

exposures regularly and takes steps to mini-

mize their impact.

Key roles

The Company’s risk management is realized

by the Board of Directors, Executive Manage-

ment Team, and other management and staff,

starting from the strategy development and

impacting all activities and processes of the

Company. These activities set out to identify

and manage risks, to provide reasonable as-

surance of the Companies’ goals accomplish-

ment. Please see the details in the “Key roles

and duties in the risk management process”

chart.

Risk management cycle

The risk management cycle includes five

stages:

• risk identification;

• risk assessment and prioritization;

• development and execution of mitigation

plan;

• monitoring of mitigation plan execution;

• risk management process enhancement.

Risk categories

The management classifies all risks into five

categories:

• Strategic (Business)

• Operational

• Financial

• Regulatory

• Sustainability

………………………………………………………………………………………………………………………………………................

Kernel’s risk identification and mitigation system

Risk identification

Risk assessment

and prioritization

Development

and execution

mitigation plan

Monitoring of

mitigation

plan

execution

Risk manage-

ment process

enhancement

Risk management

cycle

………………………………………………………………………………………………………………………………………..................

Key roles and duties in the risk management process

CEO



owner of the risk management

process for the Company as a

whole;



responsible for implementing the

risk management strategy and

functioning of the effective risk

management system.

Board of Directors

Risk Committee of the Executive Management Team

Audit Committee

Assists the Board of Directors in the discharge of its risk man-

agement responsibilities:

 formulating the description of the risks specific to the Com-

pany;



overseeing adequacy and effectiveness of Kernel’s risk

management system;



reviewing the Company’s policies on risk assessment and

risk management.

 supervise the risk manage-

ment process;

 determine and approve the

level of risk acceptability and

Company’s risk appetite;

 decide on critical and signifi-

cant risks;

 review the risk related reports.

 ensure the introduction and implementation of the risk

management policy and procedures;



develop and continuously improve an effective risk

management and monitoring system, spreading the

culture of decision-making in terms of risks, their valu-

ation and likelihood of occurrence;



coordinate roles and participants;



identify, assess, manage and control key risks;



coordinate updating and improvement of the internal

control system.

Internal Audit



assess the adequacy and effectiveness of risk man-

agement processes and internal controls in opera-

tions;



assist Directors on operational risk identification, as-

sessment, and prioritization in operations;



implementation, status monitoring, internal controls,

and mitigation activities of action plan of operational

risks;



assist, advise and consult management in improving

the effectiveness of risk management and internal

control systems in operations.

Directors and executives

risk owners within their functional duties



Identification of risks;



Assessment of risks;



Making and implementing deci-

sions on risks mitigating actions.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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Risk management continued

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Statements

Top 10 risks

This section includes a summary of the main

risks that Kernel may face during the normal

course of its business. However:

• this section does not purport to contain an

exhaustive list of the risks faced by Kernel

and Kernel may be significantly affected by

risks that it has not identified or considered

not to be material;

• some risks faced by Kernel, whether they

are mentioned in this section or not, may

arise from external factors beyond Kernel’s

control;

• whereas mitigations are mentioned in this

section, there is no guarantee that such

measures will be effective (in whole or in

part) to remove or reduce the effect of the

risk;

• investors may face other risks when dealing

with Kernel securities (shares and bonds).

As a result of the latest review cycle, the Board

approved the Top 10 risks for the Group for

FY2025 as depicted on the risk matrix. A list

of risks, together with disclosure of change in

assumptions on impact and probability, is pre-

sented in the table below.

………………………………………………………………….………………………………………………………………………............

Risks matrix

Risk impact

Risk Probability

Very low Low High Very high

Severe

MajorModerate

Minor

Medium

Strategic

(Business) risks

Operational

risks

Change

y-o-y

# Risk Name

Change in estimates

FY2025 vs FY2024

Rationale on changes in estimates

Impact

Probability

1 Weak harvest in Ukraine

New New

• With high opening stocks in two previous seasons, the size of the harvest was not

of big importance for a total supply of grain and oilseeds in Ukraine,

and was not

considered a top risk

. However, as stocks normalized for the FY2025 season, the

risk of a weak harvest has re-emerged as a significant concern. Moreover, unfa-

vorable weather in 2024 lead to a material decline in crop size in Ukraine.

2 Logistics disruptions Increase Decrease

• Increased impact, since in addition to possible logistic disruption caused by the

blockade of Ukrainian deep-

sea ports, the Group is subject to Red Sea logistics

risks.

• Decreased probability

due to a slightly more optimistic view on the operating

environment as compared to the prior year.

Loss of critical infra-

structure

No change

Increase

•

Increased probability

given the increased Group’s footprint in Ukrainian ports

following the acquisition of new assets in the last 2 years.

Low global soft com-

modity prices

Decrease

Increase

• Decreased impact and increased probability, as prices in FY2025 tend to re-

bound from low FY2024 levels.

5 Loss of Inventories Increase Decrease

• Decreased probability due to the reduced accumulation of inventories at termi-

nals, direct loading to the vessels.

Trade position risk due

to unforeseen market

volatility

Decrease

• Decreased impact and probability due to more predictable freight rates, allow-

ing better control over contract execution periods.

Credit and counterparty

risks

Decrease Decrease

• Decreased impact and probability given increased creditworthiness of Ukrain-

ian farmers (recipients of financing from the Group) since there are more sales

opportunities, hence – sources of liquidity – as compared to the prior year.

Information security and

IT risks

No change

Decrease

• Decreased probability as result of the mitigating actions implemented.

Disruption or limitation

of electricity supply

New New

• The risk was not in TOP 10 in FY2024 and was reinstated given Russian attacks

targeting energy infrastructure of Ukraine.

10 Human capital risks Increase Increase

• Increased impact and probability considering the protracted war in Ukraine and

ongoing conscription of men into military service.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Risk management continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Kernel FY2025 Top 10 risks and mitigating factors

Risk

Possible impact

Mitigating factors

1. Weak harvest

in Ukraine

• Subdued Farming segment EBITDA be-

cause of reduced total harvest size due to

unfavorable weather conditions while un-

changed cost base.

• Low crushing margins

due to

higher competition among crushers

for the limited supply of oilseeds.

•

Low capacity utilization of the

Company’s oilseed processing

plants due to the physical deficit of

the oilseeds on the market;

• Low profitability of grain export

value chain (underutilized infra-

structure capacities or depressed

margins) given that a major portion

of our grain export volumes origi-

nates from third-party farmers.

 A diversified land bank reduces to some extent the overall Farm-

ing segment's exposure to weather risks.

 Diversified oilseeds origination base:

• Our oilseed origination areas cover the whole sunflower seed

growing belt in Ukraine, thus reducing our exposure to

weather volatility in any particular region.

• Comprehensive data-driven procurement strategy based on

regional supply-demand balances composed of the official

statistics, market consensuses, and inputs from our farming

and procurement teams.

 Multi-seed processing: rapeseed processing has been in place at

some of our plants.

 The “Open Agribusiness” platform serves to share our farming

know-how with third-party farmers (thus increasing their productiv-

ity) and to provide various services to crop producers, improving in

such a way their loyalty to Kernel as a grain and oilseeds originator.

 Pre-crop financing of third-party farmers conditional upon obliga-

tory sale of future harvest (sunflower seeds and grain) to Kernel,

thus covering part of our needs.

2. Logistics dis-

ruption: closed

Ukrainian seaports

due to the war;

• Reduction in export volumes of grain, sun-

flower oil, and meal in case of continued dif-

ficulties with the export of agriproducts via

the Ukrainian Black Sea ports (a usual and

most convenient export route for Ukrainian

agricultural products);

• Growing logistics costs (railway in Ukraine

and EU, truck and barges services) caused

by substituting cheap sea freight with more

expensive auto, railway, and river logistics

with multi-modal transshipment. It hurts mar-

gins including loss-making grain export busi-

ness;

• Increase in the shipment time resulting in

more working capital required; quality deteri-

oration of goods due to long-time multi-

modal transportation.

 In case of Ukrainian Black Sea ports being blocked, the Group will

focus on transshipments via Ukrainian Danube River ports

and railway deliveries to Constanta port in Romania, as other

export channels proved to be not so efficient (higher costs and

lower throughput capacities).

 Capacity expansion. For the facilities under control, the Group un-

dertakes regular capacity expansion initiatives.

 Diversified load points in ports to mitigate risks related to any

particular port. The Group has secured transshipment capacities in

the following ports: Pivdennyi, Chornomorsk, and Reni. Addition-

ally, the Group arranged for a provision of transshipment services

with operators in the Izmail port in Ukraine, Rotterdam port in the

Netherlands, and Constanta port in Romania.

 Fleet investments to support river logistics. In FY2023, the Group

acquired two vessels (a bulker and a tanker) to support the export

of grain/meal and sunflower oil.

3. Loss of

critical

infrastructure

• Undermined earnings generation capac-

ity and additional CapEx required due to

potential loss or damages of critical infra-

structure (export terminals, oil-extraction

plants, key silos) as a result of Russian mis-

sile or drone attacks.

 Diversified asset base located relatively far from the regions of

active military actions;

 Grain and oil transshipment agreements with third-party export

terminals;

 Diversified load points in ports.

4. Low global

soft commodity

prices: grain and

oilseeds, sun-

flower oil

• Undermined profitability of the Group’s

Farming segment (which is always in a nat-

urally long position as a typical upstream

business) in case of low global grain and

oilseeds prices.

• Undermined profitability of the Group’s

Infrastructure and Trading segment, as

low prices do not allow to absorb high logis-

tics costs, and farmers prefer to wait with

sales of grain.

• Compressed margins in the Oilseed Pro-

cessing segment: low prices for sunflower

oil reduce combined earnings shared by

farmers and crushers in Ukraine in the short

term and discourage farmers from expand-

ing acreage under sunflower in the long

term.

 Hedging grain prices: we use various hedging tools, including

CME corn and soybean futures and options, forward contracts for

the Black Sea origin premium, and direct forward contacts (if avail-

able). Physical delivery forward contracts (if available) are typically

used for shorter duration hedging, normally within six months;

 A longer period of crop sales: under normal conditions, we start

selling next year’s crop as soon as we have the initial understand-

ing of the next year’s production costs, considering also the entire

value chain margin;

 Partial flexibility in determining the timing of sale of own crop,

allowing to avoid sales during extremely low-price periods;

 Deep analysis of global soft commodity fundamentals: Avere

research and trading unit provides insights into the global soft com-

modity market, guiding the selection of proper timing and pricing of

our hedging operations.

 Active procurements of sunflower seeds at the beginning of

the season (when a huge post-harvest supply of sunflower seeds

allows for negotiating more attractive prices) to partially mitigate

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Risk management continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Kernel FY2025 Top 10 risks and mitigating factors

Risk

Possible impact

Mitigating factors

long-term sunflower oil price weakness;

 Careful sales management during the season to mitigate sea-

sonal price declines.

5. Loss of inven-

tories

• Physical loss of the Group’s inventories

due to Russian missile or drone attacks.



Expanding the Group’s export capacities via alternative routes;

 Regular inventory inspection of the commodities stored in the

third-party-owned silos;

 Investments into additional storage capacities (including plastic

silo bags); signing of long-term contracts with third-party storage

service providers;

 Diversified load points in ports;

 Minimizing onsite storage in ports in favor of direct loading.

6. Trade position

risk due to un-

foreseen market

volatility

• Losses arising from the Group’s trade po-

sition mismanagement. For example, an

open position in sunflower oil may hurt the

Company’s earnings in case of significant

movements in sunflower oil prices;

• Losses arising from Avere trading busi-

ness.

 Trade position control system:

− maximum limits on the position (long/short) with daily control.

Separate limits for various goods (e.g., for sunflower oil produced

from own seeds, sunflower oil produced from purchased seeds,

and sunflower oil purchased from third parties). Specific limits are

set for sunflower seed procurement not covered by sunflower oil

sold. Special approvals are required to exceed the limits.

− a part of positions is controlled by restricting Value at Risk and

drawdown limits with daily monitoring.

− Constant monitoring of the impact of changes in market prices

on existing trade positions and improvement of the monitoring

system.

 The “Balanced book” policy employed by the Company reduces

the impact of the commodities price fluctuations through price and

volume hedging. Such a policy presupposes the arrangement of

the forward contracts for the sunflower seed sales, alongside the

procurement of the same sunflower seeds from farmers. In such a

manner, the Company reduces the risk exposure by ensuring the

sales volumes, as well as locking the selling price. Deviations from

the balanced book approach may appear during the business dis-

ruptions caused by the war in Ukraine;



Centralized contract execution and scheduling of shipments.

7. Credit and

counterparty

risks

• Defaults of third-party farmers under fi-

nancing received from the Group (includ-

ing the Open Agribusiness program);

• Losses arising due to the Group’s counter-

parties not performing their trade obliga-

tions.

 Defined parameters and high criteria for selecting farmers to par-

ticipate in the Group's financing program at the application submis-

sion and review stages.

 Constant monitoring of solvency and business performance of

the farmers who received financing from the Group;

 Negotiating with farmers on extending the obligations repayment

period or agreeing on alternative ways of repayment;

 Active restructuring and claim work against counterparties in

default.

8. Information se-

curity and IT

risks

• The loss or disclosure of key information

may threaten business operations and de-

velopment of the business;

• Interruption of business processes and

decisions which are dependent on the con-

tinuity of IT applications and infrastructure.

• Leakage of the information stored at assets

currently occupied by Russia;

• Cyber-attacks on the Group’s IT infrastruc-

ture;

• Damage to the Group’s cloud IT infrastruc-

ture occurred due to the military actions in

Ukraine; and lack of access to cloud services

provided outside of Ukraine.



The backup data center was relocated to Lviv (Western Ukraine);

 Access to the IT systems is denied at night for developers and

contractors;

 Implemented IT business continuity and data recovery policy;

 Multifactor authentication is being implemented to reduce the

risk of documents, correspondence, and other confidential data

leakage;

 Password policy, access control for external users to company IT

systems; Privileged access management solutions.

 Regular testing of IT recovery plan; regular vulnerability testing

from inside and outside;

 Patch management policy – regular installations of critical and

security patches on servers and workstations;

 Special solution to combat the advanced persistent threat (APT)

and 0-day virus attacks;

 Implementation of incident and change management processes in

the IT infrastructure;

 Improving the maturity of the access management process by

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Risk management continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Kernel FY2025 Top 10 risks and mitigating factors

Risk

Possible impact

Mitigating factors

automating the process of reviewing access rights.

 Regular training and testing of employees for knowledge and

compliance with information security rules.

9. Disruption or

limitation of elec-

tricity supply: oil

extraction plants

and export termi-

nals

• Disruption of oilseed processing

• Reduction in export volumes of grain, sun-

flower oil, and meal in case of continuing

blackout.



Alternative electricity source. Major production and export sites

are equipped with diesel electricity generation that allows continu-

ing operations during blackouts although not always at full capacity.

 The Group’s own co-generation heat and power plants serve to

mitigate power disruption risks.

10. Human capi-

tal risk

• Disruptions in business and support pro-

cesses due to:

− a shortage of staff in general and the

challenge of replacing key employees

due to the low qualifications of new can-

didates, exacerbated by significant emi-

gration from Ukraine;

− employee conscription for military ser-

vice, a consequence of the protracted

war in Ukraine;

− increased mental stress among remain-

ing employees as a result of the ongoing

and prolonged war in Ukraine.

 Competitive compensation: the level we pay matches or exceeds

the benchmark in our industries. We aim to increase further com-

pensation levels to successfully compete with neighboring coun-

tries along the way. The compensation system is regularly re-

viewed to match the Company strategy and HR strategy. We regu-

larly measure employee satisfaction levels and react to the results;

 Extensive social package:

− Housing repayable loans to young employees in the regions;

− Voluntary medical insurance (full cost coverage for employees

and 50% cost coverage for employees’ children);

− Social monetary support in case of employee’s personal life dif-

ficulties.

 Talent management, professional development, and educa-

tion of our employees. We have numerous education programs

with extensive coverage and a system of individual development

and career planning, as well as mental health education (as dis-

closed in the Sustainability section of the annual report);

 Safe and convenient working conditions. Constant improve-

ment of working conditions and infrastructure for staff. Remote

work and flexible working hours. Support of employee affinity and

networking groups;

 Effective recruitment: we use various tools and channels to re-

cruit the best people on the market. We actively work with univer-

sities and the business community and have a separate Kernel

Chance program to develop and solicit new associates;

 Employee involvement through an effective KPI system, respon-

sibility delegation, rewards for operation efficiency improvement,

and teambuilding events;

 Comprehensive new employees’ adaptation programs;

 Labor productivity improvement through processes automation

and optimization, job versatility, and employee fungibility increase;

 HR brand development, creating a sustainable employer reputa-

tion. Corporate social responsibility strategy.

Other risks identified by the Company’s management include (but are not limited to):



Liquidity associated risks;



Failure to maintain the integrity of the leasehold farmland bank;



Fraudulent activities;



A shortfall of proceeds from sales of renewable energy;



Investment projects management associated risks;



Increase in competition;



Sustainability-related risks: non-

compliance with environmental standards; undermined profitability due to more severe environmental require-

ments applicable to farming and oilseed processing related to the implementation of the European Green Deal; low sus

tainability rating of

Kernel may increase the cost of capital;



Weak economic growth, either globally or in the Group’s key markets;



Economic policy, political, social, and legal risks and uncertainties in countries other than Ukraine in which Kernel Holding S.A. operates;



Any loss or diminution in the services of Mr. Andrii Verevskyi, Kernel Holding S.A.’s chairman of the Board of Directors;



The risk that changes in the assumptions underlying the carrying value of certain assets, including those occurring as a resu

lt of adverse market

conditions, could result in the impairment of tangible and intangible assets, including goodwill;



The risk of fluctuations in the exchange rate of the Ukrainian hryvnia to the US dollar;



The risk of disruption or limitation of natural gas;



The risk of product liability claims;



The risk of potential liabilities from investigations, litigation, and fines regarding antitrust matters;



The risk that Kernel Holding S.A.’s governance and compliance processes may fail to prevent regulatory penalties or reputatio

nal harm, both

at operating subsidiaries and in joint ventures; and

 The risk that Kernel Holding S.A.’s insurance policies may provide inadequate coverage.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Alternative Performance Measures

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

To comply with the ESMA Directive on Alter-

native Performance Measures (“APMs”), Ker-

nel Holding S.A. (hereinafter “the Group”) pre-

sents this additional disclosure, which en-

hances the comparability, reliability, and com-

prehension of its financial information.

The Group presents its results in accordance

with generally accepted accounting principles

(IFRS), but management considers that cer-

tain supplemental non-IFRS measures, such

• EBITDA;

• EBITDA margin;

• Segment EBITDA;

• Segment EBITDA margin;

• Investing Cash Flows net of Fixed As-

sets Investments;

• Net Fixed Assets Investments;

• Operating Cash Flows before Working

Capital Changes;

• Free Cash Flows to the Firm;

• Debt Liabilities;

• Net Debt;

• Commodity Inventories;

• Adjusted Net Debt; and

• Adjusted Working Capital;

(together, the ‘Alternative Performance

Measures’) provide investors with a supple-

mental tool to assist in evaluating current busi-

ness performance.

The Group believes the Alternative Perfor-

mance Measures are frequently used by se-

curities analysts, investors, and other parties

interested in evaluating companies in the

Group’s industry. The Alternative Perfor-

mance Measures have limitations as analyti-

cal tools, and investors should not consider

any of them in isolation or any combination of

them together as a substitute for analysis of

the Company’s operating results as reported

under IFRS. Other companies in the industry

may calculate these Alternative Perfor-

mance Measures differently or may use them

for different purposes than Kernel Holding

S.A, limiting their usefulness as comparative

measures. Each of the Alternative Perfor-

mance Measures is defined below.

Before FY2019, the Group used to report such

APMs as Funds from Operations and Free

Cash Flows, but since FY2019 the Group

considers these metrics as not relevant any-

more, being distortive going forward. The first

APM included purchases of property, plant,

and equipment distorting the operating cash

generation capacity of the Group given the

current heavy CapEx cycle for the Group. The

second APM included dividends paid, thus

distorting the cash flow available to repay debt

In other documents (e.g. listing particulars) the Group could use the term Adjusted EBITDA, which is calculated as profit before income tax adding back net finance costs,

net foreign exchange gain, net other expenses, share of income/(loss) of joint ventures, and amortization and depreciation, and coming to the same result as EBITDA

and distribute dividends to shareholders. In-

stead, two additional APMs were introduced

(as defined below): Operating Cash Flows

before Working Capital Changes and Free

Cash Flows to the Firm.

EBITDA and EBITDA margin

The Group uses EBITDA

as a key measure

of operating performance, and it is defined as

profit from operating activities adding back

amortization and depreciation.

The Group defines EBITDA margin as

EBITDA divided by revenue during the re-

ported period.

Kernel Holding S.A. views EBITDA and

EBITDA margin as the key measures of the

Group’s performance. The Group uses

EBITDA and EBITDA margin in its public re-

porting, which is also related to the listing of

the Company’s equity on the Warsaw Stock

Exchange. The Group believes that these

measures better reflect the Group and its sub-

sidiaries’ core operating activities and provide

both management and investors with infor-

mation regarding operating performance,

which is more useful for evaluating the finan-

cial position of the Group and its subsidiaries

than traditional measures, to the exclusion of

external factors unrelated to their perfor-

mance.

EBITDA and EBITDA margin have limitations

as analytical tools, and investors should not

consider these measures in isolation or in any

combination with Non-IFRS Measures as a

substitute for analysis of the Group’s operating

results as reported under IFRS. Some of these

limitations are as follows:

• EBITDA and EBITDA margin do not reflect

the impact of finance costs, the significance

of which reflects macroeconomic conditions

and has little effect on the Group’s operating

performance;

• EBITDA and EBITDA margin do not reflect

the impact of taxes on the Group’s operat-

ing performance;

• EBITDA and EBITDA margin do not reflect

the impact of depreciation and amortization

on the Group’s performance. The assets of

the Group, which are being depreciated

and/or amortized, will need to be replaced

in the future and such depreciation and

amortization expenses may approximate

the cost of replacing these assets in the fu-

ture. By excluding this expense from

EBITDA and EBITDA margin, such

measures do not reflect the Group’s future

cash requirements for these replacements;

• EBITDA and EBITDA margin do not reflect

the impact of share of income/loss of joint

ventures, which are accounted under the

equity method;

• EBITDA and EBITDA margin do not reflect

the impact of foreign exchange gain/(loss),

which the Group does not consider to be

part of its core operating performance be-

cause the main difference arises on trans-

actions between entities of the Group with

different functional currencies;

• EBITDA and EBITDA margin do not reflect

the impact of other expenses; as such ex-

penses are not a part of the Group’s core

operations.

…………………………………………………………………………………………………………………………………………………...

Reconciliation of profit from operating activities to

EBITDA and EBITDA margin:

in thousand USD, except the margin

FY2023

FY2024

Profit from operating activities

439,460

276,428

add back:

Amortization and depreciation

104,786

104,723

EBITDA

544,246

381,151

Revenue

3,455,121

3,581,462

EBITDA margin

15.8%

10.6%

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Alternative Performance Measures continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Segment EBITDA and Segment

EBITDA margin

The Group uses Segment EBITDA and Seg-

ment EBITDA margin as the key measures of

segment operating performance. The Group

defines Segment EBITDA as profit/(loss) from

operating activities adding back amortization

and depreciation.

The Group defines Segment EBITDA margin

as Segment EBITDA divided by the segment

revenue during the reporting period.

Investing Cash Flows net of

Fixed Assets Investments

The Group uses Investing Cash Flows less

Net Fixed Assets Investments as a measure

of its expenditures on investments other than

property plant and equipment and it is defined

as net cash used in investing activities adding

back:

• purchase of property, plant and equipment;

• proceeds from disposal of property, plant,

and equipment.

Net Fixed Assets Investments

The Group uses Net Fixed Assets Invest-

ments as a measure of its expenditures on

fixed assets maintenance and it is defined as

net cash used in investing activities less In-

vesting Cash Flows net of Fixed Assets In-

vestments or, alternatively, may be calcu-

lated as cash used for purchase of property,

plant and equipment less proceeds from dis-

posal of property, plant, and equipment.

Operating Cash Flows before

Working Capital Changes

The Group uses Operating Cash Flows as a

measure of the cash generation of its core

business operations and it is defined as net

cash generated by operating activities less

changes in working capital, including:

• change in trade receivables and other finan-

cial assets;

• change in prepayments and other current

assets;

• change in restricted cash balance;

• change in taxes recoverable and prepaid;

• change in biological assets;

• change in inventories;

• change in trade accounts payable; and

• change in advances from customers and

other current liabilities.

…………………………………………………………………………………………………………………………………………………...

Calculation of Segment EBITDA and Segment EBITDA margin:

in thousand USD

FY2023

FY2024

Oilseed Processing

Profit from operating activities

240,693

49,642

plus Amortization and depreciation

29,651

33,734

Segment EBITDA

270,344

83,376

Segment revenue

1,907,681

1,863,798

Segment EBITDA margin

14%

Infrastructure and Trading

Profit from operating activities

129,149

175,536

plus Amortization and depreciation

24,608

28,255

Segment EBITDA

153,757

203,791

Segment revenue

2,601,847

2,011,138

Segment EBITDA margin

10%

Farming

Profit from operating activities

174,059

131,966

plus Amortization and depreciation

47,068

38,836

Segment EBITDA

221,127

170,802

Segment revenue

695,155

481,359

Segment EBITDA margin

32%

35%

Other

Loss from operating activities

(104,441)

(80,716)

plus Amortization and depreciation

3,459

3,898

Segment EBITDA

(100,982)

(76,818)

…………………………………………………………………………………………………………………………………………………...

Reconciliation of net cash used in investing activities to

Net Fixed Assets Investments:

in thousand USD

FY2023

FY2024

Purchase of property, plant and equipment

(77,093)

(142,578)

Proceeds from disposal of property, plant and equipment

2,720

10,175

Net Fixed Assets Investments

(74,373)

(132,403)

…………………………………………………………………………………………………………………………………………………...

Reconciliation of net cash used in investing activities to Investing Cash Flows net of Fixed

Assets Investments

in thousand USD

FY2023

FY2024

Net cash used in investing activities

9,576

(112,548)

Adding back:

Purchase of property, plant and equipment

(77,093)

(142,578)

Proceeds from disposal of property, plant and equipment

2,720

10,175

Investing Cash Flows net of Fixed Assets Investments

83,949

19,855

…………………………………………………………………………………………………………………………………………………...

Reconciliation of net cash generated by operating activities to Operating Cash Flows before

Working Capital Changes

in thousand USD

FY2023

FY2024

Net cash generated by operating activities

716,132

472,136

Less:

Changes in working capital, including:

127,633

(21,322)

Change in trade receivable and other financial assets

(443,226)

(8,803)

Change in prepayments and other current assets

(70,235)

30,859

Change in restricted cash balance

Change in taxes recoverable and prepaid

2,733

36,391

Change in biological assets

73,662

(17,181)

Change in inventories

508,182

(16,899)

Change in trade accounts payable

1,063

(45,292)

Change in advances from customers and other current lia-

bilities

55,396

(397)

Operating Cash Flows before Working Capital Changes

588,499

493,458

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Alternative Performance Measures continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Free Cash Flows to the Firm

The Group uses Free Cash Flows to the Firm

as a measure of the cash generation of its core

business operations and it is defined as the

sum of net cash generated by the operating ac-

tivities and the net cash used in investing activ-

ities.

Commodity Inventories

The Group uses Commodity Inventories

(hereinafter ‘CI’), as an additional measure of its

liquidity, which the Group uses to provide a sup-

plemental tool to assist in evaluating current

business performance and in calculating credit

ratios under certain of the Group’s financing ar-

rangements. The Group defines CI as agricul-

tural inventories, such as corn, wheat, sun-

flower oil, and other products that were easily

convertible into cash before the Russian inva-

sion of Ukraine given their commodity charac-

teristics, widely available markets, and the inter-

national pricing mechanism. The Group used to

call such inventories “Readily marketable in-

ventories”, but after the beginning of the war in

Ukraine the Group faced difficulties with selling

such inventories, and therefore such invento-

ries cannot be considered as readily marketa-

ble any longer.

Debt Liabilities

The Group uses three metrics as the measure

of its leverage and indebtedness, which con-

sists of Debt Liabilities, Net Debt, and Ad-

justed Net Debt. The Group defines Debt Li-

abilities as the sum of:

• bonds issued;

• current bond issued

• interest on bonds issued;

• long-term borrowings;

• current portion of long-term borrowings;

• short-term borrowings;

• lease liabilities and

• current portion of lease liabilities.

The Group defines Net Debt as Debt Liabili-

ties less cash and cash equivalents and cash

deposits pledged under credit facilities. Fi-

nally, the Group defines Adjusted Net Debt,

as Net Debt less commodity inventories.

Adjusted Working Capital

The Group uses Adjusted Working Capital

as a measure of its efficiency and short-term

liquidity which is defined as current assets (ex-

cluding cash and cash equivalents, and assets

classified as held for sale) less current liabili-

ties (excluding the short-term borrowings, the

current portion of long-term borrowings, cur-

rent portion of lease liabilities, the current

bond issued, the interest on bonds issued, and

liabilities associated with assets classified as

held for sale).

…………………………………………………………………………………………………………………………………………………...

The following table shows the Group’s key inventories considered eligible for

by type and the

amounts of such inventory that the Group treats as

CI as in the periods indicated:

in thousand USD

As of 30

June 2023

As of 30

June 2024

Sunflower oil & meal

117,971

93,850

Sunflower seed

25,627

84,789

Grains

137,092

67,839

Other

60,853

31,182

Total

341,543

277,660

of which: Commodity Inventories

281,855

246,749

…………………………………………………………………………………………………………………………………………………...

Calculation of

Debt Liabilities, Net and Adjusted Net Debts as on the dates indicated:

in thousand USD

As of 30

June 2023

As of 30

June 2024

Current bonds issued

596,211

597,580

Interest on bonds issued

7,612

Short-term borrowings

869,933

315,166

Lease liabilities

166,735

142,534

Current portion of lease liability

31,160

27,206

Debt Liabilities

1,671,651

1,090,098

less: cash and cash equivalents

1,076,806

809,584

Net Debt

594,845

280,514

less: commodity inventories

281,855

246,749

Adjusted Net Debt

312,990

33,765

…………………………………………………………………………………………………………………………………………………...

Reconciliation of total current assets to

Adjusted Working Capital as at the dates indicated:

in thousand USD

As of 30

June 2023

As of 30

June 2024

Total current assets

2,442,102

2,155,355

less:

Cash and cash equivalents

954,103

809,584

Total current liabilities

1,898,804

1,367,062

add back:

Short-term borrowings

869,933

315,166

Current portion of lease liabilities

31,160

27,206

Current bonds issued

596,211

597,580

Interest on bonds issued

7,612

Adjusted Working Capital

1,094,111

926,273

…………………………………………………………………………………………………………………………………………………...

Calculation of

Free Cash Flows to the Firm:

in thousand USD

FY2023

FY2024

Net cash generated by operating activities

716,132

472,136

Net cash used in investing activities

9,576

(112,548)

Free Cash Flows to the Firm

725,708

359,588

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Alternative Performance Measures continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The Management believes that these APMs assist in providing additional useful information on the underlying trends, performance and position of

the Group. APMs are used by the Management for performance analysis, planning, reporting and incentive setting purposes. The measures are

also used in discussions with the investors, investment analyst community and credit rating agencies.

APM

Calculation

Why APM is the most important for management

EBITDA

Profit from operating activities adding back amortization

and depreciation.

EBITDA is the main metric used by the management of the Group

to measure operating performance. It is also widely used by inves-

tors when evaluating businesses, and by rating agencies and cred-

itors to evaluate the leverage.

EBITDA margin

EBITDA divided by revenue during the reported period.

EBITDA margin is a metric widely used to measure profitability of

Group's operations.

Segment EBITDA

Segment profit from operating activities adding back

amortization and depreciation.

EBITDA is the main metric used by management of the Group to

measure segment operating performance.

Segment EBITDA

margin

Segment EBITDA divided by segment revenue during

the reporting period.

Segment EBITDA margin is the metric widely used to measure

profitability of Group's segment operations.

Investing Cash

Flows net of Fixed

Assets Invest-

ments

Net cash used in investing activities adding back pur-

chase of property, plant and equipment, and proceeds

from disposal of property, plant and equipment.

As the Group has grown and developed through acquisitions, this

APM helps to monitor the M&A and other investing activities of the

Group.

Net Fixed Assets

Investments

Net cash used in investing activities less Investing Cash

Flows net of Fixed Assets Investments.

The Group is executing a solid investment program, and fixed as-

sets investment is an important measure to monitor capital expendi-

ture as a part of the execution of investment program.

Operating Cash

Flows before

Working Capital

Changes

Net cash generated by operating activities less changes

in working capital activities, including:

• change in trade receivables and other financial assets;

• change in prepayments and other current assets;

• change in restricted cash balance;

• change in taxes recoverable and prepaid;

• change in biological assets;

• change in inventories;

• change in trade accounts payable; and

•

change in advances from customers and other current

liabilities.

The Group uses this APM as a pre-working capital measure that

reflects Group’s ability to generate cash for investment, debt ser-

vicing and distributions to shareholders.

Free Cash Flows

to the Firm

Sum of net cash generated by operating activities and

net cash used in investing activities.

The Group uses this APM as it reflects the cash generating capa-

bility of the Group to repay debt and distribute dividends to share-

holders.

Commodity

Inventories

Agricultural inventories, such as corn, wheat, barley, soy-

bean, sunflower seed, meal and oil.

The Group uses this APM as an additional measure of its liquidity,

which the Group uses to provide a supplemental tool to assist man-

agement and investors in evaluating current business performance

and in calculating credit ratios under certain of the Group’s financ-

ing arrangements.

Debt Liabilities

Sum of bonds issued, current bonds issued, interest on

bonds issued, long-

term borrowings, current portion of

long-term borrowings, short-term borrowings; lease lia-

bilities and current portion of lease liabilities.

The Group uses this APM, as it is a useful measure of the leverage

of the Group, which is widely used by credit investors and rating

agencies.

Net Debt

Debt Liabilities less cash and cash equivalents and

cash deposits pledged under credit facilities.

The Group uses this APM, as it is a useful measure of the leverage

of the Group, which is widely used by credit and equity investors

and rating agencies.

Adjusted Net Debt

Net Debt less commodity inventories.

The Group uses this APM as a supplemental measure of the

Group’s liquidity

, which shows the amount of Debt Liabilities not

covered by cash and commodity inventories.

Adjusted

Working

Capital

Current assets (excluding cash and cash equivalents,

and assets classified as held for sale) less current liabili-

ties (excluding short-

term borrowings, current portion of

long-

term borrowings, current portion of lease liabilities,

current bonds issued, interest on bonds issued, and lia-

bilities associated with assets classified as held for sale).

The indicator of working capital is important for the Group, as the

Group is involved in trading and processing activities and hold large

volumes of inventories on the balance. The Group also invests in

business expansion, which needs working capital inves

tments to

increase efficiency. It is useful for users and investors because it

measures both a Group’s efficiency and its short-

term financial

health. It also helps management to keep a business operating

smoothly and meet all its financial obligation within the coming year.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Sustainability report

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Over FY2024, we were focusing on advancing our

methodological approaches to the management of

decarbonization initiatives. We now have a working

prototype of the operational accounting of GHG

emissions from farming operations across individual

fields and crops. This way we can capture the differ-

ence between agroclimatic conditions, soil charac-

teristics, and agricultural technologies, including re-

generative practices, for every field. This translates

into a spectrum of carbon footprints, showing re-

movals of GHG emissions as well. As a result, we

can disclose more precise data, offer our clients dif-

ferentiated low-carbon commodities, and plan our

decarbonization efforts more efficiently.

We took the first steps towards setting concrete cli-

mate targets. Indeed, in FY2024 our Poltavsky Veg-

etable Oil Extraction Plant has committed to the Sci-

ence-Based Targets (SBTi), becoming the first

company in the Ukrainian food industry to join this

global initiative. We aim to develop a GHG emission

reduction target for the plant within the next year,

leveraging our capacity for green electricity produc-

tion from biomass by our co-generation heat and

power plants (CHPs). This exercise will equip us

with practical knowledge of the SBTi procedures be-

fore cascading such a commitment to Kernel as a

whole.

In terms of social capital development, we have pri-

oritized supporting our employees serving in the

Armed Forces of Ukraine and integrating veterans.

We are among the Top 3 companies in Ukraine re-

garding the humanitarian and societal aid during

wartime, having directed a total of USD 14 million of

material support in FY2024.

Our values and purpose that help us manage ESG risks and opportunities in agriculture sector in Ukraine

…………………………………………………………………..………………………………………………………..…..…..…..…..…..…..…..….

Sustainability as a data-driven pathway of strategic business

development

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Key highlights

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

ESG Topics Key indicators in FY2024

ENVIRONMENTAL

CAPITAL

Contribution to SDGs:

Energy management

• 8,689 TJ – total electricity consumption

• 2,146 MJ/t – energy intensity of sunflower seed processing in

FY2023

• 71 MJ/t-% – energy intensity of drying grain

• 630 MJ/t – energy intensity

Water and effluent man-

agement

• 6,391 ML – the total volume of water withdrawn

• 1,136 ML – total volume of water discharged

Waste management

• 349 tons – total volume of hazardous waste generated

• 49,915 tons – total volume of non-hazardous waste generated

Biodiversity management

• Around 35 thousand ha of cover crops

• Collaboration with NASA Harvest to monitor the impact of war on

the agriculture and environment

CLIMATE ACTION

Contribution to SDGs:

TCFD aligned disclosure

• 179 thousand tCO2e – total Scope 1 GHG emissions, excluding

690.5 thousand tCO2 of biogenic emissions

• 92 thousand tCO2e – total Scope 2 GHG emissions (location-

based)

• 150 thousand tCO2e – total Scope 2 GHG emissions (market-

based)

• 3,042 thousand tCO2e – total Scope 3 GHG emissions

Investment rating on

climate performance

• Confirmed CDP rating (Carbon Disclosure Project) at the level B,

making Kernel the only company in Ukraine with such a rating

SBTi Commitment

• Poltavsky Vegetable Oil Extraction Plant committed the SBTi, be-

coming the first company in the Ukrainian food industry to join this

global initiative

HUMAN CAPITAL

Contribution to SDGs:

Employment

• 10,904 – а total number of employees

• 2,464 – total number of new hires

• 1,491 – total number of employee turnover

• The Best Employer in the agriculture sector according to Delo.ua

national rating

• HR Brilliance Recruiting, 9

Annual HR Brilliance Awards (United

Kingdom)

Training and career

advancement

• 200,188– total number of training hours

• 1,676 – total number of employees, receiving regular performance

and career reviews

Occupational health and

safety

• 15 – total number of recordable work-related injuries

• 0.81 – lost time injury frequency rate

SOCIAL CAPITAL

Contribution to SDGs:

Economic performance

• USD 3,652 million – Direct economic value generated

•

USD 3,244 million – Total economic value distributed

• Disclosure in line with the EU Taxonomy

Support of local commu-

nities and society as a

whole

• USD 25 million – total amount of social spendings, which in-

cludes support of the Ukrainian Army, humanitarian aid during mili-

tary time and other charity expenses.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Environmental capital

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Environmental capital

Energy management

Our management approach to energy re-

sources and efficiency

Consumption of energy resources is one of

the most material indicators of our operational

activities. We constantly research and inte-

grate various approaches towards the im-

provement of our energy efficiency, which in

turn reduces our contribution to the national

volume of GHG emissions. In addition, given

our potential to be the largest producer of elec-

tricity from biomass in Ukraine, we strive to be

a role model in the regional agriculture market

in driving energy saving and climate actions.

Our management approach towards energy

resources and energy efficiency is rooted in

the corporate Code of Conduct and Environ-

mental protection policy. There are energy

managers employed within each business

segment, who are responsible for overseeing

Kernel’s energy-related operations and inte-

grating energy efficiency measures. In fact,

the team of nine specialists (Energy Manage-

ment Service) covers Oilseed Processing and

Infrastructure and Trading; in addition, there

are engineers on production sites, providing

technical support for the energy system. En-

ergy efficiency issues in the Farming segment,

namely efficient use of fuel by agricultural ma-

chinery, are managed by the Engineering ser-

vice. The latter is also responsible for explor-

ing and testing new technologies and ma-

chines, which can help decrease fuel con-

sumption.

Our energy management performance

In FY2024, the overall consumption of energy

slightly increased due to the gradual commis-

sioning of the newly constructed Starokosti-

antyniv oilseed processing plant.

Our Oilseed Processing segment is the main

consumer of electricity. Its most significant en-

ergy-intensive technological processes in-

clude drying of raw materials, wet heat treat-

ment of raw materials, cooling, oil treatment by

steam and cooling, drying and cooling of

meals, steam condensation, and heat recov-

ery processes. Natural gas is mostly con-

sumed by Infrastructure and Trading, partic-

ularly by silos. It is used in grain drying opera-

tions, the most energy-intensive processes

being purification and drying of production,

handling, and shipment of raw materials and

storage. With regards to the Farming seg-

ment, it predominantly uses liquid fuel, such

as diesel and petroleum, in agricultural ma-

chinery.

Vovchansk OEP in the Kharkiv region, along with ready-to-install CHP equipment, was lost, reducing the initial project scope. The total amount of USD 19 million invest-

ments directed in CHP equipment was written-off in FY2022.

Over the reporting period, the Group in-

creased the volume of electricity sold to the

national energy grid by 73%, reaching a total

of 1,094 terajoules. This electricity was pro-

duced from biomass at five co-generation heat

and power plants (CHPs), located at our Kro-

pyvnytskyi, Prydniprovskyi, Poltava, Ban-

durka, and “Ukrainian Black Sea Industry” oil

extraction plants (OEPs). Our ‘green’ electric-

ity is particularly valuable since we do not pro-

duce biomass separately to be combusted on

our CHPs but rather use sunflower seed husk,

a side product of the main operational activity

approved as a feedstock for advanced biofu-

els by Annex IX.A. of RED II EU Directive.

These CHPs are a part of our USD 218 million

investment project, resulting in a total of six

CHPs with 84.4MW of power generation ca-

pacity, making Kernel the largest in Ukraine

producer of electricity from biomass

In addition to being sold to the national energy

grid, the produced electricity is also used for

our own needs, namely, to produce steam on

our OEPs. The Group seeks to strengthen its

energy efficiency efforts within the Oilseed

Processing segment by scaling up the con-

sumption of our own electricity produced at

CHPs. This is one of the key aspects of Ker-

nel’s systematic approach to decarbonizing

each stage of sunflower oil production.

In the Farming segment, our energy effi-

ciency approaches the target for our agricul-

tural machinery fleet. We continuously re-

search the market and development projects

of major global producers of agricultural ma-

chines. Besides, we upgrade our machines

every 5-6 years to replace them with more ef-

ficient fuel-consuming options.

In addition, our existing machines, especially

fuel-intensive ones, are equipped with GPS

trackers and a remote system for monitoring

fuel consumption. These help us to optimize

the usage of fuel and decrease the fuel inten-

sity of standard operations. For example, the

operation of deep loosening with mineral ferti-

lizers application executed by a machine us-

ing an RTK-guided autopilot system, which al-

lows to avoid overlaps in application, saving

around 4.2% of both fuel and fertilizers. Over-

all, Kernel dedicated significant resources to

the development of its agricultural innovative

solutions with the Digital Agribusiness system

and application of AI to increase production ef-

ficiency. The company regularly collects and

analyses data, both with agricultural machin-

ery and remote sensing technology, on agro-

chemical and weather conditions from individ-

ual field plots. The long-term goal of such a

process is to operate based on a highly gran-

ulated understanding of soil characteristics

and potential within every field. This allows us

to apply a tailored set of practices and precise

amounts of fertilizers or pesticides. Such ap-

proach helps to achieve higher productivity

with minimum destruction of natural capital. In

FY2024, Kernel continued testing the ap-

proach of a tailored combination of practices

on a pilot set of fields. Preliminary calculations

estimate savings of USD 28 per hectare from

this method.

Over FY2024, Kernel also made efforts to re-

duce fuel consumption in the logistics depart-

ment. The Group has integrated the eco-driv-

ing approach into the fleet of the road trains.

Using special GPS-based tracking software,

we collect detailed operational data from each

vehicle, including actual fuel consumption and

driving styles. By analyzing this data, we iden-

tify ways to improve routes and modes of

transportation to increase fuel efficiency. The

system ranks drivers according to their perfor-

mance, and those with the highest grades re-

ceive additional remuneration as motivation.

As a result of this program, we achieved a 3%

reduction in overall fuel consumption by inter-

group logistics (more than 200 thousand li-

ters). The logistics department has also con-

ducted training to raise awareness of the new

approach and the need to improve energy ef-

ficiency.

RTK-guided autopilot system saves

4.2% of fuel and fertilizer avoiding

application overlaps

Drone sprayers allow to reduce die-

sel consumption by 1.5-

2.5 liters per

hectare

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Environmental capital continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Water and effluent management

Our management approach to water re-

sources and efficiency

We constantly improve our approaches to ra-

tional water consumption and wastewater

treatment, aiming to increase water use effi-

ciency and decrease our impact on the envi-

ronment. Our approach is embedded in Envi-

ronmental protection policy. Kernel under-

takes water withdrawal in line with valid ‘Spe-

cial water use’ permits, fully compliant with

national legislation.

Kernel closely monitors operations in water-

stressed areas. Our water use accounting sys-

tem includes information on assets' location in

terms of water stress zones: two of our active

oil extraction plants withdraw water in areas

with high water stress, and two plants operate

in areas with medium water stress. In addition,

we undertake strict measures to prevent water

contamination from our operations, the high-

est risk of which is associated with farming ac-

tivities. Specifically, we ensure the precise ap-

plication of fertilizers and pesticides to the soil,

allowing us to control the risk of their runoff to

water bodies; in addition, we do not have farm-

ing and manure management operations in

the protection buffer zones of water bodies.

Our water management performance

In the Oilseed Processing segment water is

used primarily for technical purposes, namely

production of steam, and domestic needs.

Each of our OEPs has an emergency water

reserve, used in case of fire, and six of our

plants have stormwater collection systems to

prevent contamination of soil and groundwater

with oil residue and solid particles. The col-

lected stormwater is not used in the production

processes, due to food safety requirements

limitations.

Natural precipitation is the main source of wa-

ter for our crop production operations, thus

less than 1% of our landbank is irrigated. Con-

sequently, irrigation purposes account for the

largest share of the total volume of water used

by the Farming segment. We apply ad-

vanced monitoring techniques to accurately

identify the water needs of our crops and ex-

ploit the modern pumping and distribution

equipment, allowing minimal technical loss of

water. Kernel’s irrigation experts have been

………………………………………………………………………………………………………………………………………….………..……………………………………………………………………………..

Key energy management indicators

FY2022

FY2023

FY2024

Energy consumption, terajoules

Non-renewable fuel consumed

2,915.1

2,381.2

1,895.0

Natural gas

1,578.8

1,194.6

717.0

Oilseed Processing

149.1

112.0

212.2

Infrastructure and Trading

1,394.9

1,031.8

486.3

Farming

34.7

50.8

18.5

Other

0.0

Diesel

1,247.3

1,113.1

1,099.6

Oilseed Processing

8.2

3.6

9.1

Infrastructure and Trading

34.6

50.3

28.8

Farming

1,198.3

1,051.2

1,056.6

Other

6.2

7.9

5.2

Petroleum

39.7

37.9

43.4

Oilseed Processing

1.2

0.6

1.0

Infrastructure and Trading

4.5

4.2

5.8

Farming

25.8

32.4

29.2

Other

8.2

0.7

7.4

LNG

49.3

35.6

35.0

Oilseed Processing

0.3

0.2

Infrastructure and Trading

2.5

1.7

2.0

Farming

45.3

33.7

32.2

Other

1.2

0.5

Renewable fuel consumed (sunflower seed husk)

3,551.5

5,189.2

7,028.0

Electricity

736.4

782.6

820.9

Oilseed Processing

512.3

617.4

689.7

Infrastructure and Trading

171.9

127.3

83.8

Farming

49.7

38.0

47.5

Other

2.5

0.0

Heating

0.9

0.0

0.2

Oilseed Processing

Infrastructure and Trading

Farming

0.1

0.2

Other

0.7

Electricity sold to the grid

322,5

631.7

1,094.3

Total energy consumption

6,881.4

7,721.4

8,688.5

Oilseed processing

3,900.1

5,291.3

6,846.0

Infrastructure and Trading

1,608.6

1,215.3

652.6

Farming

1,353.9

1,206.1

1,176.9

Other

18.8

8.7

13.0

Energy intensity indicators, megajoules,

Energy consumed per ton of sunflower seed crushed

1,425.6

2,058.7

2,279.6

Energy consumed per ton-% of grain dried

57.8

64.3

70.6

Energy consumed per ton of harvested grain

589.5

632.2

629.5

Note 1:

Any discrepancies between data in this and previous reports (FY2023 and FY2022) are associated with clarifications of raw data and alignment of conversion

factors.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Environmental capital continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

actively involved in the working group, coordi-

nated by the Ministry of Agrarian Policy of

Ukraine, aimed at developing the foundation

for the implementation of the Law of Ukraine

“On the organization of water users and stim-

ulation of hydro-technical melioration of land”,

adopted in March 2022. The Law provides for

the establishment of water use organiza-

tions (WOUs), drive the development of irri-

gation systems in Ukraine and make them ac-

cessible for farmers.

In FY2024, Kernel’s Prydniprovskyi Cluster

successfully initiated the establishment of the

two WUOs, namely Hradizka WOU in the Pol-

tava region and Dmytrivka WOU in the Cher-

kasy region. This project contributes to the im-

plementation of the broader Irrigation and

Drainage Strategy of Ukraine, developed by

the Ministry of Agrarian Policy. As part of this

project, we modernized outdated and ineffi-

cient pumping equipment and automated wa-

ter supply systems. We also improved compo-

nents of the irrigation infrastructure, i.e. hydro-

insulating intake canals. These developments

are expected to enhance the efficiency of irri-

gation, reduce water usage costs, and im-

prove overall agricultural productivity.

In the Farming division, water is also used for

animal husbandry and technological pur-

poses, such as dilution and application of crop

protection chemicals and fertilizers. In the

case of animal husbandry, we reduce water

usage by applying a dry method of removing

manure from cowsheds using conveyor scrap-

ers. We also constantly test and integrate dif-

ferent avenues to reduce water use in the pro-

cess of agrochemical application.

In addition to the water-saving measures on

the operational level, Kernel invests in techno-

logical solutions that allow it to increase water

use efficiency in the long term. On our Ban-

durka and Black Sea Industry CHPs, we ex-

ploit dry cooling systems. These are three

times more expensive than traditional wet

cooling systems but allow us to save up to 320

megaliters of water annually.

In FY2024, Kernel implemented a project on

the modernization of the system of steam sup-

ply and condensate removal from the heat ex-

changer and toaster at Poltava OEP. As a re-

sult, the plant reduced steam consumption by

two tons per hour, which is about 15% lower

compared to pre-project levels. The project

also led to decreased volumes of water and

chemicals involved in the process of water

preparation. Furthermore, this allowed us to

increase electricity generation capacity by 0.3

MW. Building upon these results, the Group

plans to implement similar projects at four

other plants.

Our management approach to

wastewater treatment

All wastewater generated during our pro-

cessing operations undergoes treatment be-

fore being discharged to water bodies. Four oil

extraction plants have full-cycle water treat-

ment systems in operations, which provide bi-

ological, physical, and chemical purification.

In FY2024, we purified 128.2 megaliters of

wastewater on our water treatment system,

105.3 megaliters of which underwent physical-

chemical and biological treatments, and 22.92

megaliters were treated through dissolved air

flotation. In case an oil extraction plant is con-

nected to a municipal wastewater treatment

plant (WWTP), wastewater is pre-treated on

the site to meet the requirements of a WWTP

and is directed at a proper external treatment.

The quality of treated wastewater is monitored

by our laboratories, which analyze water sam-

ples in line with the Ukrainian national regula-

tion on maximum permissible discharges of

pollutants, maximum levels of which are spec-

ified in a “Special water use” permit.

Such permits limit the volumes of withdrawn

water and/or the volumes and quality of efflu-

ents based on surveys that define hydrological

conditions, baseline water quality, and the as-

similation capacity of a water body. The per-

mitting authority uses information on water

use within a watershed or aquifer to set permit

conditions in a way that balances the interests

of all users and keeps cumulative pollution lev-

els within the national water quality standards.

The regulatory requirements were the only cri-

teria for setting permit conditions that define

the quality of our effluents. Parameters of

wastewater, controlled during laboratory test-

ing, include eight substances, as well as bio-

logical (five-day) and chemical demands of ox-

ygen. In FY2024, there were no incidents of

non-compliance with quality requirements of

wastewater quality.

………………………………………………………………………………………………………………………………………….………..…………………………………………………………………………..…

Scheme of Kernel’s water management cycle at oil extraction plants

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Environmental capital continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Waste management

Changes in the Ukrainian waste manage-

ment legislation

Over the reporting period, Kernel integrated

the changes in its waste management ap-

proaches and accounting to reflect the re-

quirements of the new Waste Management

Law, which came into force on 9 July 2023.

This law aims to align Ukraine's waste man-

agement system with European standards

and practices.

Key highlights of the new legislation include:

• Extended Producer Responsibility

(EPR): Producers are now accountable for

the entire lifecycle of their products, partic-

ularly the waste they generate. This in-

cludes packaging, electrical and electronic

equipment, batteries, and other products.

Producers must finance the collection, recy-

cling, and disposal of their products' waste.

• Waste Management Hierarchy: The law

emphasizes a waste management hierar-

chy that prioritizes waste prevention, fol-

lowed by preparation for reuse, recycling,

other recovery operations (e.g., energy re-

covery), and disposal as a last resort.

• Municipal Waste Management: A munici-

pal household waste management system

is established and managed by an Adminis-

trator responsible for the effective collec-

tion, billing, and handling of claims related

to waste services.

• E-Waste System: A unified state electronic

waste system (e-waste) will be introduced

to manage waste data and interactions

electronically, enhancing transparency and

accountability.

• Hazardous Waste Management: Stricter

regulations for hazardous waste, including

the requirement for permits for collection,

transport, and treatment, as well as specific

requirements for waste incineration and

landfill operations.

Further reforms are expected to be imple-

mented by the end of 2024, focusing on inte-

grating more comprehensive environmental

and waste management practices as part of

Ukraine's broader effort to integrate European

Union environmental standards and improve

the sustainability of its waste management

practices. The implementation of these laws is

expected to foster a more efficient, transpar-

ent, and environmentally friendly waste man-

agement system in Ukraine.

Our management approach to waste gen-

eration and treatment

Minimization of waste, as well as its proper

treatment, is one of the key indicators of our

operational efficiency. We aim to identify and

implement measures towards the reduction of

the overall volume of waste through the mod-

ernization of technological processes, includ-

ing the reuse of waste across divisions, con-

tributing to the long-term sustainability of our

Key water management indicators

FY2023

FY2024

Total

Areas with water

stress

Total

Areas with water

stress

Water withdrawal, megaliters

4,739.6

847.7

6,398.0

833.2

by source

ground water

1,401.4

840.2

1,538.1

819,0

surface water

2,529.2

7.5

3,595.4

11,5

municipal suppliers (third-party water)

809.0

1,264.5

2,6

by business segment

Oilseed Processing

1,666.5

752.3

2,319.0

754,9

Infrastructure and Trading

29.8

1.87

76.0

3,8

Farming, incl.:

3,043.3

93.6

4,040.4

74,5

Irrigation

2,518.1

3,530.0

Animal husbandry

207.6

189.4

Water discharge, megaliters

870.5

207.6

1,135.7

217.3

by types of destination

surface water

98.1

105.3

municipal suppliers (third-party water)

772.4

109.5

1,030.4

112.0

by business segment

Oilseed Processing

860.7

207.6

1,127.6

217.3

Infrastructure and Trading

151.9

0.0

271.7

0.0

Discharge of substances, tons

dry residue (mineralization)

406.7

129.7

1,303.0

122.7

sulfates

96.4

57.3

313.1

57.1

chlorides

88.6

46.4

242.9

53.7

suspended particles

51.1

25.3

74.6

25.4

fats

10.8

8.7

10.5

8.2

other substances

240.3

110.6

251.2

114.0

………………………………………………………………………………………………………………………………………….………

Key waste management indicators

in FY2024

tons

The volume of generated hazardous waste

349.3

including by management approach

Transferred for utilization

266.1

Sold to 3d parties

81.2

Landfilling

Volume of generated non-hazardous waste

45,914.8

including by management approach

Transferred for utilization

1,923.8

Sold to 3d parties

32,512.0

Landfilling

11,410.8

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Environmental capital continued

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Sustainability

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Corporate

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Financial

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business, as well as through the establish-

ment of controls over waste generation, trans-

portation, and storage.

In FY2024, Kernel further optimized its waste

management approach, emphasizing reduc-

tion, reuse, and responsible disposal. These

practices are integrated into our Environmen-

tal Protection Policy and Code of Conduct.

Waste that cannot be reused within the pro-

duction chain is transferred to licensed dis-

posal or recycling providers, selected from an

official list maintained by the Ministry of Envi-

ronmental Protection of Ukraine. The Ministry

ensures compliance through regular verifica-

tion, and violations can result in license revo-

cation. We expect our contractors to adhere to

the same waste management standards, re-

quiring them to control waste generation and

prevent mixing different types of waste. Con-

tractors must also provide agreements with li-

censed disposal and recycling services as

proof of compliance.

Our waste management performance

In the Farming segment, the waste from op-

erational activities includes:

• Crop residue that is normally left distrib-

uted on the field and might also be incorpo-

rated in soil or mulched. Part of the straw is

used for cattle management as bedding. No

crop residue is burned on the field, as it is

strictly forbidden.

• Pesticide packaging is collected

separately, depending on the class of haz-

ard, and transferred to a licensed provider

of waste disposal services.

• Manure is the main type of waste from ani-

mal husbandry. After manure is removed

from cowsheds with scrapper conveyors, it

is transported to embanked storage areas,

where it undergoes natural composting in

piles. All storage sites are located outside of

settlements, in leeward areas, and away

from water protection buffer zones to avoid

contamination. Manure is mainly applied in

fields as organic fertilizer, and part of it is

distributed among local communities for

gardening purposes. In FY2024, we applied

organic fertilizers, namely manure and di-

gestate, over an area of 1,738 ha.

• Cows’ carcasses are disposed of in regis-

tered bio-thermal pits in compliance with the

requirements of the State Veterinary Com-

mittee.

Milk production does not generate packaging

waste, as final products are sold in bulk.

In the Infrastructure and Trading segment

generation of waste is associated mainly with

the grain purification process and includes:

• Fraction of substandard grain and crop

residue, separated from main products and

mainly used as cattle fodder in our animal

husbandry business or sold to third parties.

In addition, we use crop residue as a fuel on

one of our drying installations for the gener-

ation of steam.

Our main product in this segment, grain, is

sold in bulk and does not generate additional

packaging waste.

In the Oilseed Processing segment, the main

source of waste is sunflower ash, produced

from combustion during power generation and

used as a raw material for fertilizer production.

Ash is valuable for its chemical composition,

namely its high potassium content and lack of

hazardous admixture. Applying ash in fields

allows us to return a part of harvested nutri-

ents back to the soil.

In the Oilseed Processing business, the

main final product is crude oil sold in bulk for

further processing by customers. The remain-

ing volume of produced oil is refined, bottled,

and packed. Waste generation from plastic

and cardboard packaging occurs downstream

among customers.

Other types of waste result from operational

household activities, such as machinery

maintenance, construction and engineering

works, and wastewater treatment.

By maintaining high standards in waste man-

agement, compliance, and continuous optimi-

zation, Kernel has set the benchmark in the

agricultural industry for environmental respon-

sibility and sustainability. The company's ef-

forts reflect a dedicated approach to manag-

ing waste efficiently, adhering to regulations,

and implementing innovative solutions for

………………………………………………………………………………………………………………………………………….………..……………………………………………………………………..……...

Scheme of Kernel’s waste management cycle

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Environmental capital continued

Management

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Corporate

Governance

Financial

Statements

waste reduction and reuse.

Biodiversity management

Our management approach to biodiversity

protection

Given the nature of Kernel’s business of oper-

ations, specifically farming activities, we are

strongly committed to both minimizing our

negative impact on biodiversity and undertak-

ing specific measures to conserve and boost

biodiversity. This approach is reflected in our

Environmental protection policy.

The key principle in delivering this commit-

ment is ensuring comprehensive and detailed

monitoring of our farming activities, which we

perform throughout our innovative DigitalAg-

ribusiness ecosystem. We apply IT, AI, and

Big Data solutions to accumulate information

on fields and technological operations. This al-

lows us to improve our practices of precise

farming, to strengthen our risk management

approaches, and to control interactions and

impact on natural ecosystems. We exploit

RTK-guided autopilot agriculture machinery

on all our fields; we collaborate with other

companies, sharing the RTK signal and in-

creasing the area coverage where precise

farming is applied. We also monitor our fields

through remote sensing technologies by

collecting data, such as NDVI

, from satellites,

helicopters, and on-site data collection facili-

ties, which are then synchronized in data-

bases and analyzed with GIS (Geographic In-

formation Systems) programs. Additionally,

these analytical tools are made accessible in

operational activities on the ground: in their

everyday work, our agronomists use tablets

with installed ‘Mobile Agronomist’ scouting

application, making the process of risk as-

sessment and decision-making more effec-

tive.

Furthermore, we undertake thorough due dili-

gence before the conclusion of the lease,

which includes evaluation of the physical con-

dition, such as quality of soil and existing veg-

etation, as well as the legal status of the land,

namely ownership rights, registered land use

limitations and legal suitability for farming,

which also includes proximity to conservation

areas. Therefore, we do not operate in the

areas with high biodiversity value, specifi-

cally in (1) protected natural zones as defined

by the national legislation and (2) wildlife and

natural habitats at the 377 Areas of Specified

Conservation Interest (ASCI) that are part of

the Ukrainian zone of the Emerald Network,

established by the Bern Convention.

In addition, our farming operations and our

Normalized Difference Vegetation Index quantifies vegetation by measuring the difference between near-infrared (which vegetation strongly reflects) and red light

(which vegetation absorbs). NDVI is a standardized way to measure healthy vegetation – the higher the NDVI, the healthier vegetation.

Rotterdam Convention on the Prior Informed Consent Procedure for Certain Hazardous Chemicals and Pesticides in International Trade

suppliers of grain and oilseed are not associ-

ated with deforestation. In Ukraine, forestry

and agriculture land banks are governed by

different laws that prohibit the conversion of

forests into agricultural land. Furthermore,

Ukraine is historically known for its large terri-

tories of agricultural land (almost 70% of the

country’s territories), which have not been for-

ested over the last 50 years. Issues of illegal

deforestation in Ukraine are specific to the

lands of the forest fund and are not associated

with agricultural activities. In addition to such

legislative limitations, Kernel adopted a non-

deforestation commitment. We are also

committed to preventing the expansion of ara-

ble lands at the cost of natural habitats and

other territories not intended for farming, both

in our own operations and in supply chains.

Our biodiversity management perfor-

mance

Our practical approaches to minimizing the

adverse impacts of our farming operations on

biodiversity include the following:

• Promotion of soil biodiversity. Kernel ac-

tively researches and tests applications of

biological fertilizers, including phosphorus-

and nitrogen-fixing bacteria. We are the first

agriculture company in Ukraine to establish

and run our own microbiological laboratory,

where we closely evaluate the benefits of

biological fertilizers on soil health. We also

use bio destructors, namely bacteria and

fungi, that contribute to maintaining the bio-

diversity of soil while also intensifying the

decomposition of organic crop residues

mulched and left in fields, leading to a sub-

sequent return of nutrients from residue

back to the soil. Bio destructors also have a

fungicidal effect, protecting crops from

harmful microorganisms. In FY2024, the to-

tal area of application of biological products

accounted for 484,695 ha.

We are closely researching agricultural

technologies that have a high potential for

reducing GHG emissions associated with

farming operations and have a positive im-

pact on biodiversity. Not only do the ap-

proaches such as reduced tillage, cover,

and perennial crops allow us to sequestrate

carbon, but also conserve ecosystems of

microorganisms in the soil, crop residue,

and plant biomass. In FY2024, Kernel

sowed around 35 thousand hectares of

cover crops.

• Integrated pest management system.

When undertaking pest control actions to

reduce crop exposure to diseases, we com-

ply with applicable national and interna-

tional regulations. We only use authorized

plant protection products, listed in the State

registry of pesticides and agrochemicals al-

lowed to be used in Ukraine. Also, we do not

apply chemicals prohibited by the Stock-

holm Convention on Persistent Organic

pollutants and products, listed in Annex

3 of the Rotterdam Convention

. We con-

stantly improve our pest management ap-

proaches by adjusting them in line with leg-

islative changes on pesticides in other

countries. For example, since 2021, we

have been gradually reducing the use of ne-

onicotinoid products. In a few years, their

application will be limited to Thiacloprid and

Acetamiprid, which are used in certain EU

countries and have lower toxicity for bees

and wild insects. Before using a new

………………………………………………………………………………………………………………………………………….………..

Map of Kernel’s presence in areas with high biodiversity value in Ukraine

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Environmental capital continued

Management

Report

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Report

Corporate

Governance

Financial

Statements

substance on the operational scale, we test

it on our R&D fields (more than 25 thousand

hectares).

Pesticides are applied by self-propelled

spraying machinery equipped with a posi-

tioning control system that deactivates

sprayers outside field boundaries, prevent-

ing overlapping and re-application. In addi-

tion, machines have automatic remote con-

trols for weather conditions, which account

for wind, allowing for minimized off-the-field

releases of pesticides.

• Control of seed quality. For sowing cam-

paigns, Kernel only uses breeds and hy-

brids of seeds, listed in the State Registry of

Plant Species Eligible for Cultivation in

Ukraine, which excludes genetically modi-

fied seeds. All seeds, either produced inter-

nally or sourced from the market, undergo a

thorough examination in Kernel’s accred-

ited laboratory before sowing.

• Monitoring soil nutrients. At least once

per crop rotation cycle, we analyze soil

quality at our agrochemical laboratory by

taking over 2,000 soil samples (from 25-30

centimeters depths). Based on the evalua-

tion results, we adjust our crop mix plans,

production technology, and fertilization

practices where required. A test-based ap-

proach to fertilizer application allows for

maintaining a deficit-free balance of nutri-

ents and thus prevents deterioration of soil

quality.

In FY2024, Kernel developed and adopted

comprehensive plans on biodiversity conver-

sation and soil health management for each

Farming cluster as part of the ISCC certifica-

tion process. In line with these plans, Kernel,

among other things, aims to integrate bioin-

secticides and biofungicides in the plant pro-

tection program, to further improve spraying

technology to minimize the contact of plant

protection chemicals with the ecosystem and

increase the application of destructors and soil

amelioration.

Biodiversity conservation in the times of

war

As a result of the Russian invasion of Ukraine,

up to 174 thousand square kilometers of

Ukrainian land have become potentially mined

or damaged with explosive objects, a signifi-

cant portion of which is agricultural land. Ac-

tive work on their restoration, decontamina-

tion, and ensuring maximum safety is neces-

sary to guarantee stable harvests.

In FY2024, Kernel’s Data Science department

joined the NASA Harvest initiative (NASA's

program for global food security and agricul-

ture) to assess the impact of hostilities on

Ukrainian agriculture and agricultural

Certification ISO 14001 covers key trading company Kernel-Trade, six oil crushing plants, two farming clusters, fifteen silos and one trading terminal

production in the occupied territories—with

the support of the Ministry of Agrarian Policy

and Food of Ukraine. A pilot project focuses

on developing remote sensing-based ma-

chine-learning approaches to crop-type map-

ping. NASA Harvest maps were validated

based on Kernel data and obtained around

90% accuracy in 2022 and 2023 for winter ce-

reals, rapeseed, and sunflower. This ground-

work will contribute to the development of a re-

liable tool of reliable monitoring of agricultural

lands.

Monitoring of environmental impacts

and ecological compliance

Our management approach towards regula-

tion of the impacts of our operations on the en-

vironment is built on two pillars, namely (1)

continuous monitoring of key environmental

performance indicators to be aligned with per-

mit requirements and to successfully pass

environmental inspections, and (2) procedure

of environmental impact assessment (EIA)

and strategic environmental assessment

(SEA) in line with the national legislation for

planned activities that pose a high risk of sig-

nificant environmental impacts.

These priorities are reflected in our Code of

Conduct and in Environmental protection pol-

icy provisions which account for EBRD’s Per-

formance Requirements. We expect our sup-

pliers to uphold the same level of environmen-

tal responsibility, as stated in our Code of In-

teraction with Suppliers. Mechanisms of envi-

ronmental monitoring are practically imple-

mented through a group-wide environmental

management system (EMS), which is certified

with the ISO 140001 “Environmental man-

agement” standard

. Responsibility for per-

forming environmental monitoring and ensur-

ing compliance with relevant legislation lies on

the assets-based team of environmental spe-

cialists (11 full-time employees). Given the na-

ture of our business operations, we are

required to obtain permits for air emissions,

water withdrawal, and discharge of

wastewater to water bodies. The process of

obtaining permits is performed both by Ker-

nel’s team of environmental specialists and by

involving external contractors.

In FY2024, Kernel’s assets obtained a total of

27 new permits, including 11 air emission per-

mits, 15 water withdrawal permits, and 1 per-

mit for subsoil use. Moreover, over the report-

ing period, Kernel has been working on com-

pleting the environmental impact assessment

(EIA) process for seven projects.

In line with permit obligations, we have devel-

oped monitoring programs to control the envi-

ronmental quality of our operations. These in-

clude analyzing air, soil, and water quality and

assessing levels of noise and vibration pollu-

tion. The state environmental inspectorate did

not perform environmental compliance in-

spections on our assets in FY2024, since in-

spections are forbidden during martial law.

Importantly, we considered and successfully

resolved all four complaints regarding Kernel’s

operations from local citizens. In FY2024, we

spent a total of USD 199 thousand on

measures associated with mitigation of envi-

ronmental impacts and environmental protec-

tion.

………………………………………………………………………………………………………………………………………….………..

Key environmental monitoring indicators in FY2024

Scope of monitoring

# of

checks

# of sites

monitored

# of samples

taken

Air quality

210

1,815

Conditions of emissions permit

1,143

Conditions of EIA

394

Areas at boarders with SPA

101

278

Water quality

192

Ground water

179

Surface water

Soil quality

101

102

Areas of waste storage

Areas at boarders with SPA

Noise pollution

210

1,815

Vibration pollution

1,143

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

TCFD disclosure

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Climate actions (TCFD disclo-

sure)

Governance

Board oversight of climate-related risks

and opportunities

Kernel’s Sustainability Committee of the

Board of Directors is the body responsible for

(1) identifying, prioritizing, and advising the

Board on the company’s strategic activities in

the areas of decarbonization, climate-related

business opportunities, development of envi-

ronmental, social and human capital, and sus-

tainability governance (hereinafter – ‘ESG’)

and sustainable finance; (2) critically review-

ing and considering the ESG Strategy, which

will incorporate SBTi aligned climate targets

and decarbonization pathway; (3) ensuring

the implementation of the ESG Strategy

across business operations; (4) connecting

ESG and climate corporate agendas with Ker-

nel’s business strategy, business objectives

and capital allocation decision.

The Sustainability Committee consists of at

least three members, appointed by the Board

of Directors upon proposal of the Nomination

and Remuneration Committee; the Chair of

the Committee appoints a secretary, who is

normally a sustainability manager of the

Group. For that reason, the Sustainability

Board Committee acts as an effective link be-

tween the Board of Directors and the Execu-

tive Management Team.

The Sustainability Committee meets twice a fi-

nancial year. The purpose of such meetings is

the following:

• update on priority business opportunities re-

lated to sustainability function and climate

change

• when required, review of changes in rele-

vant policies and procedures

• when required, review and approval of stra-

tegic targets, associated with decarboniza-

tion and sustainable development.

The Audit Committee critically reviews and

prioritizes physical and transition climate risks

as part of its responsibilities to assist the

Board of Directors in delivering its risk man-

agement responsibilities by providing a de-

scription of risks specific to Kernel, overseeing

the adequacy and effectiveness of Kernel’s

risk management system, and reviewing the

company’s policies on risk assessment and

risk management.

Management’s role in assessing and man-

aging climate-related risks and opportuni-

ties

Kernel seeks to integrate ESG and climate

corporate agendas in the company’s overall

business strategy and operations. For that

reason, the Executive Management Team is

actively engaged in the implementation of

ESG and climate action practices and initia-

tives within their respective functions, that are

considered as priority at a specific time. Kernel

plans and prioritizes such initiatives based on

its vision of the role of the company and agri-

cultural sector in general in delivering the

goals of the Paris Agreement and our place

within the international climate arena. We

develop our vision based on our understand-

ing of global dynamics in the areas of decar-

bonization and carbon markets, which is com-

plemented by our ongoing dialogue with our

key trade partners, and major global agricul-

ture commodity traders.

The Chief Executive Officer of Kernel plays

a key role in overseeing the integration of ESG

and climate corporate agendas in business

operations. The CEO provides a critical review

and feedback on the development of Kernel's

ESG and climate corporate strategy, including

GHG emission reduction targets, approaches

to the development of the sustainability and

climate corporate strategy across operations,

as well as on engagement in relevant busi-

ness opportunities related to decarbonization.

Throughout FY2024, Kernel’s executive

management was addressing the following

strategic targets, related to decarbonization

and sustainable development, namely:

1. Development of the framework for

systematic attraction of sustainable fi-

nance: Chief Financial Officer

2. Research and realization of business

opportunities associated with low-

carbon development: Heads of Trading

3. Integration of operational accounting

of GHG emissions from agriculture

operations: Director of Agribusiness, Di-

rector of IT, Chief Financial Officer

The HR Director provides overall support to

initiatives related to low-carbon development.

This includes the development of climate-re-

lated KPIs for the Executive Management

Team, which are then cascaded across each

corporate function. The head of the HR De-

partment is also responsible for communi-

cating the importance and benefits of sustain-

ability practices and climate actions within the

Group and supporting their implementation

from the behavioral perspective. Kernel’s

Head of Sustainability is in direct subordina-

tion to the Head of the HR department. The

Head of Sustainability is responsible for lead-

ing the development and improvement of Ker-

nel's sustainability and climate corporate func-

tion.

The Risk Committee of the Executive Man-

agement Team is responsible for the identifi-

cation, assessment, management, and control

of the key risks, including climate-related risks.

Strategy

In 2023, Kernel finalized the "Climate corpo-

rate governance and low-carbon pathway"

project in partnership with EBRD, which in-

volved the assessment of climate-related risks

and opportunities (in line with TCFD recom-

mendations), gap analysis of climate govern-

ance, feasibility analysis mitigation and adap-

tation measures.

Building on the results of this project, Kernel

developed a comprehensive action plan,

which includes actions of an organizational

and investment nature aiming to improve Ker-

nel’s climate corporate governance perfor-

mance. Such actions were developed across

material groups: agribusiness, production, en-

ergy, carbon offsets, production, supply chain,

GHG accounting, risk, strategy, governance,

and sustainable finance. The action plan was

reviewed by the Sustainability committee of

the Board of Directors, prioritizing actions and

reflecting them in respective KPIs for execu-

tive and operational managers. The action

plan will serve as the cornerstone of the

Group’s future climate transition strategy and

emission reduction targets aligned with the

SBTi FLAG guidance.

As a part of preparing and implementing such

an action plan, the Group is actively evaluating

options for corporate GHG emission reduction

targets by integrating a detailed operational

accounting system and addressing business

opportunities and risks associated with the ap-

plication of low-carbon farming practices.

Approach to climate risk identification and

management

Kernel's overall approach to managing risks,

including climate physical and transitional

risks, and to evaluating their impact on busi-

ness is governed by the company's Risk Man-

agement Policy and underlying procedures.

The policy reflects a comprehensive risk man-

agement framework developed by Kernel,

which includes a 5-steps risk identification and

mitigation system, namely:

• Risk identification;

• Risk assessment and prioritization;

• Development and execution of risk mitiga-

tion plan;

• Monitoring of plan execution;

• Enhancement of risk management process.

The risk management framework operates in

five risk categories: strategic (business), oper-

ational, financial, regulatory, and sustainabil-

ity. In terms of climate-related risks, strategic

(business) and operational categories account

for physical climate long-term and short-term

risks, respectively. Transitional climate risks

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

TCFD disclosure continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

are covered by the regulatory category and

sustainability category, covering a broader

group of environmental and social risks.

For annual operational planning, the company

re-evaluates and updates the matrix of the top

10 risks, subsequently approved by the Board

of Directors. The risk of acute climate events

in the production cycle is embedded in the risk

category 'weak harvest in Ukraine'. The risk of

weak harvest is applied to each business seg-

ment of the company: (1) Kernel's own farm-

ing operations (direct impact); (2) capacity uti-

lization of Kernel's silos and export terminals

due to physical shortage of grain on the mar-

ket and oil crushing margins due to limited

supply of oilseeds (indirect impact); (3) export

value chain, because the majority of Kernel's

grain export volumes normally originates from

third-party suppliers.

The risk management process is implemented

on an ongoing basis by the Board of Directors,

executive management, and operational man-

agement. The board considers risks of sub-

stantial financial impact, and other risks are

dealt with at the executive management and

operational management levels. Indeed, the

Executive Management Team ensures that all

risks are systematically identified, quantified,

monitored, mitigated, and managed daily.

Within the 'Climate change strategy and low-

carbon pathway' project, Kernel works to inte-

grate a more articulated approach to the iden-

tification, evaluation, and management of cli-

mate physical and transition risks in line with

the TCFD recommendations. This includes an

assessment of the impacts of climate-re-

lated risks on the enterprise value.

With regards to climate physical risks, such an

approach involves the regular assessment of

climate change information provided by the

Regional Climate Models (specifically

CMIP6 Projections using SSP 2.6-4.5 sce-

nario also referred to as ‘Net Zero 2050’ and

SSP 8.5 scenario also referred to as ‘Nation-

ally Determined Contributions’ to inform man-

agement decisions) to understand the dynam-

ics of climate change impact across Kernel's

landbank in the long-term perspective. Rele-

vant parameters of these scenarios are used

for stress-testing Kernel's financial model,

allowing it to evaluate the Group's exposure to

long-term climate change impacts and their

monetary interpretation (i.e. impact on

EBITDA). Evaluation of transitional climate

risks is also to be reflected in the company's

financial model and accounts for implications

of both domestic and European carbon regu-

lations.

The interconnection between climate physical

and transitional risks is linked to the assump-

tion that SSP 2.6-4.5 scenarios would imply

that carbon regulations will be tightened sig-

nificantly. It will strongly affect the Company’s

performance, but the Company will be less ex-

posed to the physical risks. In contrast, the

SSP 8.5 scenario implies that carbon regula-

tions will be tightened moderately and softly

affect the company’s performance, but in turn,

the company will be more exposed to physical

risks.

Kernel's approaches to the identification, as-

sessment, and management of climate risks

are the following:

• Climate physical risks are evaluated on

the operational level. Kernel's modeling and

monitoring team, which includes experts in

geographic information systems (GIS),

along with financial and business analysts,

continuously monitors key climate indica-

tors. This involves data collected from the

company’s meteorological stations and sat-

ellite data, such as NDVI (Normalized Dif-

ference Vegetation Index) indicators, which

reflect vegetation responses to weather

conditions and their interconnections with fi-

nancial and business performance. Further-

more, Kernel’s farming segment holds stra-

tegic sessions twice a year, before spring

and winter sowing campaigns, where Ker-

nel’s agricultural experts, building on this

analysis, undertake short-term business

planning, profound consultation, and deci-

sion-making on managing acute climate

risks and adaptation practices.

• Monitoring of chronic climate risks is

based on the company's practical observa-

tions and analysis of available agrometeor-

ological research on changes in Ukraine's

climate zones and yield dynamics. To that

end, Kernel's business analysts undertake

a regular analysis of harvest results of both

Kernel and other agriculture companies in

Ukraine and compare these indicators be-

tween geographic regions. Such exercises

help to identify climate patterns and tenden-

cies across the company's land bank, which

are used to make informed long-term stra-

tegic decisions regarding the geographic lo-

cation of assets. Such decisions are made

at the level of the Executive Management

Team or the level of the Board of Directors

if the monetary implication of risk is higher

than the established substantial strategic

impact threshold.

• Kernel's sustainability function undertakes

the identification of climate transitional risks

through the ongoing monitoring of develop-

ments in domestic and EU carbon regula-

tions. Material transitional risks are evalu-

ated in terms of their monetary impact to-

gether with financial and business analytics.

It is then brought up to the Executive Man-

agement Team or the Board of Directors' at-

tention if the impact of the risk is considered

significant. Evaluation of climate transitional

risks is based on analysis of NGFS (Net-

work for Greening the Financial System)

scenarios of carbon prices within EU ETS

and in Ukraine. Analysis of these scenarios

and financial implication of climate transi-

tional risks, as well as information on key

drivers of these risks (i.e. developments in

EU and domestic climate regulations), are

updated on an annual basis and approved

by the Audit Committee at the Board of Di-

rectors.

In FY2024, Kernel updated the list of material

climate transitional risks by removing the risk

of the inclusion of maritime transport in the EU

Emissions Trading Scheme (EU ETS) as it

had already materialized. Indeed, since Janu-

ary 2024, the EU ETS has been extended to

cover CO

emissions from all large ships en-

tering EU ports, regardless of the flag they fly.

This regulation is directly applied to Kernel’s

two own vessels.

Material climate-related risks

Chronic physical risks

For Kernel's operations, chronic physical cli-

mate risks are relevant both from the perspec-

tive of long-term strategic impact on the loca-

tion of assets, and impact on yields of key

crops. Analysis of the overall dynamic in the

climate system across the territory of Ukraine

demonstrates a gradual shift in the boundaries

of natural zones (woodlands, forest-steppe,

steppe) towards the northwest. The shift in cli-

mate zones leads to an extension of land that

falls under the category of risky farming and,

therefore, to the increased price of lease

agreements for agricultural land suitable for

growing grain and oilseeds (the so-called ‘corn

belt of Ukraine’).

Assessment and monitoring of dynamics in cli-

mate conditions on Kernel's landbank are on-

going and involve (1) analysis of meteorologi-

cal data obtained from Kernel's meteorological

stations (a total of 51 stations) and satellite cli-

mate change data obtained from GIS solu-

tions frameworks such as GEOSIS, under-

taken by the modeling and monitoring team,

and (2) retrospective analysis of harvest from

both Kernel's landbank and in Ukraine in gen-

eral, made by the team of financial and busi-

ness analysts.

Kernel has a subscription to the provider of

GIS (geographic information system) solu-

tions provided by GEOSIS Technologies for

the ongoing monitoring of changes in the veg-

etation and visualization of climate-related

data relevant to the regions of the company’s

operations and potential expansion,. These

solutions allow us to consolidate and analyze

climate-related data and relevant patterns ob-

tained from satellite images. The cost of the

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response to climate chronic physical risks also

includes technical maintenance of Kernel's

own agrometeorological stations, IT support

and development of the company’s Digital Ag-

ribusiness program, and maintenance of the

company’s own drones that undertake remote

sensing of the landbank.

In FY2024, Kernel complemented its annual

chronic climate risk assessment with the pro-

jections of Global Agro-Ecological Zoning for

Ukraine, prepared by the Food and Agriculture

Organization (FAO)

Acute physical risks

The risk of acute climatic events resulting in

decreased yields is a basic risk for the agricul-

ture business. Within Kernel's risk manage-

ment framework, this risk is reflected in the

risk category 'Weak harvest in Ukraine', which

is normally included in the top 10 Company’s

risks list. Likewise, the Company's financial

modeling provides for conservative basic as-

sumptions of reduced yields due to impacts of

acute climate impacts. In addition, acute cli-

mate physical risks are also applicable to Ker-

nel's infrastructure since extreme weather

conditions would impact farming business

across the whole country (impact on Kernel's

supply chain and trading operations), leading

to decreased capacity operations of the com-

pany's silos and oil crushing plants.

We evaluate acute physical risks based on the

Regional Climate Model (RCM) of climate dy-

namics in the territory of Ukraine. RCM col-

lects data on single levels from numerous ex-

periments, models, domains, resolutions, en-

semble members, time frequencies, and peri-

ods computed over several regional domains

all over the World, particularly in the CMIP 6

of the Coordinated Regional Climate

Downscaling Experiment (CORDEX) frame-

work. The analysis showed that the frequency

of acute climate events (droughts) in northern

parts of Kernel's landbank would increase un-

der the SSP 8.5 scenario in a long-term per-

spective.

In FY2024, Kernel enhanced the analysis of

physical acute risks by evaluating the financial

consequences of extreme weather events,

particularly heatwaves and drought during the

pollination period, on the 2024 harvest, and

using it as a reference for future estimations.

Kernel aims to undertake a more profound

analysis of the historical dynamic of the

Group’s harvest and its correlation with ex-

treme weather conditions to tailor the analysis

to the actual on-the-ground data.

The company’s response to this risk includes

Food and Agriculture Organization of the United Nations, GAEZ Data Portal, https://gaez.fao.org/pages/country-profiles

the organization of strategic sessions of the

Farming segment twice a year before the

spring and winter sowing campaigns. During

this meeting directors of Kernel’s farming clus-

ters (cluster is an organizational unit in Ker-

nel’s landbank and farming operations; there

are a total of 5 clusters), agricultural experts,

as well as business and financial analytics un-

dertake broad consultations on results of pre-

vious harvest seasons; identify areas for im-

provement in agriculture practices; analyze

available data and projections of weather con-

ditions during the next harvest season; under-

take short-term business planning, profound

consultation and decision-making on manage-

ment of climate acute risks and adaptation

practices.

The response also includes technical ex-

penses to support research and development

centers, which are specifically dedicated fields

where the company tests new farming prac-

tices, including resistant FAO hybrids, inhibi-

tors of nitrification, biological destructors, etc.

Transitional risk: emerging carbon regula-

tion in Ukraine

Regarding Ukraine's carbon tax, it increased

from 10 UAH to 30 UAH per ton of CO

2021. Although the rate remained unchanged

in FY2024, we anticipate that the rate of the

carbon tax will continue growing over the next

years to become aligned with an average price

of a ton of CO

in the EU (these expectations

are based on Ukraine's commitments under

EU Association Agreement and its candidacy

to EU, as well as Ukraine's possible response

to EU CBAM requirements). Kernel evaluates

the risk of the expected growth of carbon tax

in the following years based on the average

carbon tax value in EU member countries

(EUR 20-120/tCO

), which would lead to sig-

nificant annual expenditures.

Ukraine's carbon tax applies to Kernel's com-

bined heat and power plants that produce

electricity from sunflower seed husk (side

product to the oilseed crushing process, ap-

proved as a feedstock to provide advanced

biofuels as per Annex IX.A. of RED II Di-

rective). The nature of these risks lies in the

fact that such regulation contradicts Ukraine's

regulation on Monitoring, Verification, and Re-

porting (MRV) and the EU's position on the

combustion of biomass and production of ad-

vanced biofuels, GHG emissions of which are

considered to be zero.

Regarding Ukraine's national emission trading

scheme (ETS), the key risk for Kernel is the

significant increase in electricity price, when

ETS is finalized and launched. This

assumption is based on EU average whole-

sale electricity prices of EUR 110/MWh in

2022, compared to Ukraine's industry electric-

ity prices of approximately EUR 70/MWh in the

same year. Although Ukraine's ETS develop-

ment is in its early stages and not expected to

be finalized for at least seven years, we

closely monitor this risk. The potential financial

implications are evaluated according to the

NGFS (Network for Greening the Financial

System) climate modeling of the carbon price

dynamic in Ukraine.

As of FY2024, under the SSP 2.6-4.5 sce-

nario, the carbon price in Ukraine is projected

to increase up to EUR 177.94/tCO

, and under

the SSP 8.5, the price would reach EUR

5.10/tCO

by 2030. In the range of potential fi-

nancial impact, the minimum figure is the com-

bined impact of increased carbon tax and in-

creased price of electricity once the UA ETS is

implemented in 2030 under the SSP 8.5,

whereas the maximum figure – under the SSP

2.6-4.5 scenario.

Kernel actively participates in business asso-

ciations, namely the European Business As-

sociation and American Chamber of Com-

merce in Ukraine, where we contribute to the

development of common business positions

on different matters (i.e. energy transition,

food-energy balance, as well as bioenergy

and biofuels as integral pillars of the REPow-

erEU initiative) and their communication to the

government. Tax on GHG emissions gener-

ated from biomass combustion is one of the

key issues where Kernel demonstrates a

strong position as the largest producer of elec-

tricity from biomass in Ukraine.

Transitional risk: emerging carbon regula-

tion in EU (increasing cost of fertilizers)

EU's ‘Fit for 55’ package (under which EU

seeks to cut its emissions by at least 55% be-

fore 2030) includes provisions on the ETS,

namely the target to reduce the emissions by

61% before 2030 and to reduce the number of

free allowances by 4.2% each year. GHG

emissions from the production of nitric acid,

ammonia, and hydrogen are covered by the

EU ETS. Considering that nitric acid, ammo-

nia, and hydrogen are intermediates in the

production of NPK fertilizers, it is expected

that the price of EU-sourced fertilizers will in-

crease following the implementation of Fit for

55 provisions. As of FY2024, if produced in the

EU, the price of fertilizers would reflect the

price of EU allowances on GHG emissions,

which are projected to increase up to EUR

263.21/tCO

under the SSP 2.6-4.5 scenario

and to EUR 129.04/tCO

under the SSP 8.5

scenario by 2030 (according to NGFS climate

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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data projections). In the case of domestically

produced fertilizers, their price would account

for a projected carbon price in Ukraine: EUR

177.94/tCO

under SSP 2.6-4.5 scenario and

EUR 5.10/tCO

under SSP 8.5 scenario by

2030 (according to NGFS climate data projec-

tions). In the range of potential financial im-

pact, the minimum figure is the combined im-

pact of the increased price of carbon allow-

ances under the EU ETS and the UA ETS

once implemented in 2030 under the SSP 8.5,

whereas the maximum figure – under the SSP

2.6-4.5 scenario.

In FY2024, in response to this risk, Kernel

continued engaging with current suppliers of

nitrogen fertilizers to collect data on the car-

bon footprint of their production and include it

in relevant Scope 3 calculations. The Group

also began exploring sustainable finance op-

portunities to support efficient collaboration

with fertilizer suppliers. In the long-term

perspective, this information would be applied

to optimize the suppliers' portfolio and to initi-

ate bilateral cooperation toward decreasing

purchased fertilizers' carbon footprint. We ex-

pect that access to carbon footprint data will

be simplified when fertilizer producers start

disclosing this information under the CBAM

regulations.

Metrics and targets

Kernel’s Scope 1, Scope 2, and Scope 3

………………………………………………………………………………………………………………………………………….………….…………………………………………………………………………...

Material climate-related opportunities

In FY2024, Kernel re-evaluated material categories of business opportunities, associated with

emerging decarbonization regulations in the EU,

development of new markets that aim to incentivize companies to reduce emissions and contribute to energy transition, as well

as partnerships to

support low-carbon development of agriculture sector globally.

Product group

Specification

1. Bioenergy

Kernel explores opportunities associated with the production of biofuels, namely biomethane produced from plant-

based feedstock such as silage corn or crop residue. This opportunity stems from the growing demand for energy

sources both in Ukraine and in th

e EU (REPowerEU initiative aimed to reduce dependency on Russian natural gas),

amid changes in regional energy geopolitics following Russian invasion of Ukraine.

This opportunity is also supported by developments in relevant domestic legislations, which allow injection of bio-

methane in the gas transportation system and provides for establishment of national registry of renewable gas guar-

antees of origin (RGGO) for biomethane producers.

Diversification of fi-

nancial assets with

sustainability- and

climate-linked fi-

nance

We aim to effectively access markets of sustainability- and climate-linked finance, both in terms of receiving special-

ized interest rates on loans (linked to specific covenants) and project finance. It's understandable that there are yet

no unified rules

of such finance, particularly in agriculture sector in Ukraine, and standardized criteria for investing in

nature and social capital.

Therefore, the company started building focused dialogues with key investors, commercial banks and financial insti-

tutions to develop tailored approaches of attracting different types of sustainable- and climate finance in an evidence-

based manner. Kernel s

eeks to develop a comprehensive sustainable finance framework, building on the outcomes

of the 'Corporate climate governance and low-carbon pathway' project.

The purpose of such framework is to develop evidence-

based quantifiable criteria (covenants) of sustainability and

climate-

linked finance, tailored to different types of financial products and aligned with the company’s overarching

sustainability strategy; and to coordinate them with a pool of potential investors, IFIs, local commercial banks etc.

Voluntary carbon

markets

This opportunity is associated with the access to voluntary carbon markets. The company is currently testing collab-

oration with an accelerator of agriculture-based carbon offsets. T

he main purpose of such pilot interaction is to better

understand different approaches of carbon marketplaces to calculate a baseline, changes in soil carbon stock due to

tillage, crop rotation and application of cover crops for each kind of crops, impact of inhibitors of nitrification on reduc-

tion potential and other technical nuances of GHG emissions accounting for agriculture sector.

Building on such observations the company seeks to align its operational accounting of carbon footprint and strategies

on realizing this opportunity with the rules of global carbon market mechanism (Article 6.2 and Article 6.4 of the Paris

Agreement). Exploration of carbon offsets markets, goes hand in hand with in-depth analysis of global market incen-

tives towards decarbonizing supply chain of agriculture commodities, building relevant dialogue with reputable inter-

national organizations and exchanging knowledge with key trading partners.

Efficiency improve-

ment through car-

bon farming prac-

tices

The opportunity lies around the system of farming practices that promote accumulation of soil organic carbon, reduc-

tion of GHG emissions from tillage and nitrification, improving soil health and biodiversity. These practices are com-

monly referred to as reg

enerative, or carbon, farming which is one of the key pillars of the company’s corporate climate

strategy. We believe that this is a long-term direction of development, which would have a visible impact on capitali-

zation, and over the last several years th

is subject has moved from purely theoretical discussion toward practical

consideration during operational planning and testing.

The company is undertaking an ongoing screening of possible channels for comprehensive monetization of carbon

farming practices through its focused engagement with trade partners and other stakeholders (more details in C12.1d).

For now, the performance of carbon farming practices can be quantified through optimization of nutrition rates (includ-

ing through application of inhibitors of nitrification) and, therefore, operational expenses on nitrogen fertilizers. As of

now, the potential impact of such measures

can lead up to 20% lower application of N per hectare; this figure may

vary as the company scales up its regenerative farming practices.

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greenhouse gas (GHG) emissions and

other air emissions

Kernel accounts for GHG emissions gener-

ated from operational activities in Ukraine, ad-

hering to the IPCC Guidelines for National

Greenhouse Gas Inventories and Green-

house Gas Protocol Guidance.

Scope 1 emissions include direct GHG emis-

sions associated with the company's opera-

tions of fossil fuel stationary and mobile

combustion, cattle farming, farmland culti-

vation (soil carbon stock change), and fer-

tilizer application. The company’s total bio-

genic GHG emissions generated from the

combustion of sunflower seed husk and

changes in organic carbon stocks are reported

as a separate figure. Emissions associated

with farming operations are reported in the fi-

nancial year, when the agricultural products

were harvested, using data on mineral and or-

ganic fertilizers applied during the growth pe-

riod in crops.

In FY2024, we developed a prototype opera-

tional accounting of GHG emissions from

farming operations across key crops (winter

wheat, corn, sunflower, winter rapeseed, and

soybean) and individual fields (Kernel’s whole

landbank combined of around 5 thousand

fields). The main purpose of such an approach

is to reflect that the landbank is not homoge-

neous in terms of soil characteristics, agrocli-

matic conditions, and, therefore, agriculture

technology and application rates. Therefore,

it’s correct to calculate the carbon footprint of

farming operations (kgCO

/t of yield and

kgCO

/ha) for each field rather than on aver-

age for the whole landbank. This approach

also enables the demonstration of annual car-

bon removals (shown as negative values) re-

sulting from changes in tillage practices, such

as shifting from conventional to reduced till-

age, sowing cover crops, and managing crop

residue.

Additionally, Kernel started working with the

consultancy, the Carbon Trust, to undertake

an independent gap analysis of the prototype

accounting system in preparation for its further

verification. The goal is to automatize such ac-

counting by integrating the methodology into

existing ERP systems and to ensure traceabil-

ity of the carbon footprint of each batch of

grain (originating from a particular field) across

the value chain. For these purposes we seek

to ensure minimization of data uncertainty:

calculations of changes in soil carbon due to

tillage are performed using "measure and

model" and "measure and re-measure" ap-

proaches (aligned with the Verified Carbon

Standard methodology, VM0042) that account

for availability of laboratory agrochemical data

on soil organic carbon.

This approach will allow us to monitor field re-

lated carbon footprint of its commodities (in

kgCO

e/t of yield) and operations (in

kgCO

e/ha) from the stage of sowing planning

until harvest, allowing the company to better

evaluate the overall potential for decarboniza-

tion of farming operations, allowing it to priori-

tize geographic location and intensity of low-

carbon practices and achieve reduction of

GHG emissions with higher monetary efficacy.

Scope 2 (location-based) emissions refer to

GHG emissions generated from energy (elec-

tricity and heating) the company consumes.

The average specific emission factor for elec-

tricity production in Ukraine is calculated as

the ratio of total emissions from electricity pro-

duction in Ukraine (source: National Inventory

Report to UNFCCC) to energy production it-

self (source from Ministry of Energy and Coal

Mining).

Scope 2 (market-based) emissions refer to

GHG emissions from energy (electricity and

heating) consumed. Carbon intensity of heat-

ing both location and market-based approach

is the same due to vertically integrated market

and heating monopoly supply. Market-based

carbon intensity of electricity supplied is higher

than the grid average (location-based) due to

a decreased share of low carbon capacities in

the electricity trade portfolio allocated for the

relevant supplying contract (data from Ker-

nel’s electricity supplier) – a significant share

of nuclear and hydro capacities in Ukraine are

contracted for households by using special

purpose agreements.

Scope 3. To calculate Scope 3 emissions,

Kernel applies methodology, provided by the

GHG Protocol Corporate Value Chain (Scope

3) Accounting and Reporting Standard. We

evaluated all 15 categories of Scope 3 emis-

sions, namely:

• Purchased goods and services: This cate-

gory of emissions includes three material

types of purchased products: (1) purchased

grains and oilseeds, (2) purchased agricul-

ture machinery, and (3) purchased fertiliz-

ers. In case of emissions associated with

the purchased grains, the accounting ap-

proach lies in the application of carbon in-

tensity factors of Kernel's own crops to the

volumes of the purchased grains. As for the

emissions associated with purchased agri-

culture machinery, a spend-based method

was used, where emission factors were cal-

culated based on the carbon intensity of net

revenue of machinery producers (material

producers included CNH Industrial, John

Deere, MAN, and Palfinger). In case of the

emissions associated with the production of

nitrogen fertilizers purchased by Kernel, the

content of nitrogen was calculated, and a

………………………………………………………………………………………………………………………………………….…………

Key GHG emission indicators

thousand tCO2e

FY2022

FY2023

FY2024

Scope 1

255.6

279.6

194.5

by GHG

88.4

135.2

44.1

22.8

23.3

23.4

144.5

121.1

127.0

by business segment

Oilseed Processing

9.1

6.6

12.7

Infrastructure and Trading

81.3

62.2

30.0

Farming

164.1

210.2

150.9

Fuel use

71.7

91.7

90.0

Fertilizers application

136.0

100.6

116.9

Changes in stock of soil carbon

-69.1

-18.5

-82.3

Cattle methane from enteric fermentation

25.5

26.2

26.3

Other

1.2

0.7

1.0

Biogenic (combustion of sunflower husk)

348.9

509.8

690.5

Scope 2 (Location based)

79.3

83.4

91.5

Scope 2 (Market based)

84.1

136.7

150.1

Scope 3

1,699.5

1,475.3

2,314.6

Cat.1. Purchased goods and services

1,339.6

787.2

934.7

Cat.2. Capital goods

22.5

4.3

8.6

Cat.3. Fuel- and energy-related activities (not incl.in S.1-2)

52.4

69.2

56.1

Cat.4. Upstream transportation and distribution

16.8

23.7

17.4

Cat.5. Waste generated in operations

4.99

4.4

6.6

Cat.9. Downstream transportation and distribution

253.5

591.7

1,262.4

Cat.10. Processing of sold products

3.1

3.5

28.1

Cat.12. End-of-life treatment of sold products

0.1

0.8

0.7

Note 1: Any

discrepancies between data in this and previous reports (FY2022 and FY2023) are associated

with the new (prototyped) accounting approach across key crops, farming operations and individual fields.

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sector average emission factor was applied

(kg CO2e/kg N).

• Capital goods: In this category, Kernel ac-

counted for the emissions associated with

the production of metal and concrete, used

for the construction of assets. The company

applied material use emission factors for

metal and concrete from the UK Depart-

ment of Environment, Food and Rural Af-

fairs (DEFRA).

• Fuel-and-energy-related activities (not in-

cluded in Scope 1 or 2): To calculate this

category of emissions, Kernel used primary

data on energy consumption and applied

Well-to-tank indicators (Activity A) from

DEFRA; transmission and distribution

losses data for Ukraine (Activity C); as well

as average heat rate of local thermal power

plants (Activity B) to calculate emissions

across three types of activities: Activity A

(39,369.9 tons CO2e), Activity B (20,800.4

tons CO2e), Activity C (9,066.0 tons CO2e).

• Upstream transportation and distribution:

This category includes emissions from the

transportation of purchased goods and in-

ternal logistics (i.e. transportation of grains

from fields to silos and from silos to termi-

nals). The company applied the Freighting

goods emission factors for vans and HGV

from DEFRA. In case of the spend-based

method of emission accounting, the emis-

sion factors were calculated based on the

carbon intensity of the net revenue of pro-

viders of logistics services.

• Waste generation in services: For this cate-

gory, Kernel used primary data on waste

generation and approaches to waste utiliza-

tion, including treatment of wastewater dis-

charged to WWTPs. The company applied

the Waste disposal emission factors from

DEFRA.

• Business travel: This category of emissions

is not material in comparison to the total vol-

ume of Scope 3 GHG emissions. We eval-

uated this category of emissions and con-

cluded that it remains immaterial for Kernel

operations (less than 1 tCO

e).

• Employee commuting: This category of

emissions is not material in comparison to

the total volume of Scope 3 GHG emis-

sions. We evaluated this category of emis-

sions and concluded that it remains imma-

terial for Kernel operations (less than 1

tCO

e).

• Upstream leased assets: Kernel does not

have leased assets within its operations.

• Downstream transportation and distribution:

This category includes the emissions asso-

ciated with the marine freight of sold prod-

ucts (grain and oil) – from the combustion of

fuel by ships, mostly Panamax class. Re-

spective emission factors from DEFRA for

the burning of marine fuel oil were applied

considering the shipping costs and average

fuel spent share.

• Processing of sold products: This category

includes emissions associated with the

refining of sunflower oil. Unrefined sun-

flower oil purchased from Kernel typically

undergoes a refining process at the facilities

of a buyer. To calculate such emissions the

company used the average electricity effi-

ciency factor for its own refining process

and applied grid emission factors for each

country where sunflower oil was exported

(The IFI Dataset of Default Grid Factors).

• Use of sold products: Kernel sells final prod-

ucts, including grains, sunflower oil, and an-

imal meal. In case the sold products are

used in the energy sector, the sunflower oil-

related biodiesel component of fuel is con-

sidered zero-carbon.

• End-of-life treatment of sold products: this

category includes the emissions associated

with the treatment of the waste sold. Kernel

used primary data on the waste sold and to

its utilization approaches. The relevant

Waste disposal emission factors from

DEFRA were applied. However, this cate-

gory of emissions is not material in compar-

ison to the total volume of Scope 3 emis-

sions.

• Downstream leased assets: This category

of emissions is not relevant to Kernel's busi-

ness, as the company does not provide

leased assets.

• Franchises: This category of emissions is

not relevant to Kernel's business as the

company neither acts as an investor nor

does it have shares in emission-related

portfolios.

• Investments: This category of emissions is

not relevant to Kernel's business as the

Company neither acts as an investor nor

does it have shares in emission-related

portfolios.

To reduce N

O emissions, Kernel applies dif-

ferentiated mineral fertilization that pre-

vents excessive volumes of nitrogen from end-

ing up in the atmosphere. Based on crop mon-

itoring data, this technique helps to reduce the

portion of fertilizer by 10-15%. The proper ap-

plication timing is equally important. For

corn, winter wheat, rapeseed, and sunflower

annual portion of nitrogen is applied in 2-3

phases.

We apply a stabilized liquid nitrogen ferti-

lizer (urea-ammonia mixture) in spring to en-

sure the minimum time between application

and crop undertaken. In autumn we use only

ammonia-based fertilizers after the average

daily soil temperature falls below 10°C.

Additionally, we apply nitrification inhibitors

and cultivate cover crops. To limit CO2

………………………………………………………………………………………………………………………………………….………..

Other significant air emissions

FY2022

FY2023

FY2024

Air pollutants, thousand tones

2.43

2.40

3.05

Carbon oxide

0.64

0.67

0.92

Sulfur dioxide

0.06

0.05

0.08

Nitrogen oxides

0.41

0.42

0.84

Solid substances

1.32

1.26

1.22

Ozone-depleting substances, tCO

1,364.2

1,228.4

R-407C

95.8

R-134A

72.9

32.9

R-507A

1,195.5

Hexane, tones

942.5

958.7

1,231.0

………………………………………………………………………………………………………………………………………….…………

Key GHG emissions intensity indicators (Scope 1&2)

FY2022

FY2023

FY2024

GHG emissions per volume of harvested crop,

kg CO2e/ t of yields

Corn

203.6

201.9

57.4

Sunflower

330.1

336.2

93.3

Wheat

130.8

232.6

66.0

Rapeseed

331.7

335.1

381.5

Soybean

321.7

320.9

-110.7

GHG emissions per area of sowed crop,

kg CO2e/ ha

Corn

1,887.7

1,765.6

563.2

Sunflower

1,007.9

922.1

296.2

Wheat

803.7

1,224.5

377.0

Rapeseed

1,318.1

1,139.6

1,231.4

Soybean

650.9

913.2

-293.9

GHG emissions per sunflower seeds processed

kg CO2e/ t of seeds

32.1

28.2

27.0

Note 1: Any discrepancies between data in this and previous reports (FY2022 and FY2021) are associated

with clarifications of raw data, alignment of relevant conversion factors and other corrections in calculations.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

TCFD disclosure continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

emissions, we reduce both specific fuel con-

sumption and mileage of the field machinery

through regular modernization of the fleet

and optimized routing, respectively.

Emission of other significant emissions, such

as air pollutants, are associated with the com-

bustion of sunflower husk at oil extraction

plants and are calculated by the sites' environ-

mental specialists for statutory reporting pur-

poses on a quarterly basis. Calculations are

based on the volumes of combusted husk and

established specific emission factors.

Hexane emissions, which are linked to its use

as a solvent in edible oil extraction, are care-

fully regulated and minimized during transpor-

tation, storage, and application to ensure both

resource efficiency and safety. All equipment

in contact with hexane at Kernel’s plants com-

plies with the EU ATEX Directive the EU

ATEX Directive (2014/34/EU ‘Equipment for

potentially explosive atmosphere’). The sol-

vent is reused through multiple extraction cy-

cles.

Emissions of ozone-depleting substances,

namely refrigerants, are associated with the

operation of industrial cooling equipment at

two oil extraction plants and in the animal hus-

bandry division.

To prevent dust emissions associated with

grain and oilseed handling, we apply sophisti-

cated design solutions and techniques that

minimize contact of material flows with the at-

mosphere. This includes closed-type grain

and oilseed unloading stations, conveyor

lines, and ship-loading machines with ad-

vanced dust control features. Where preven-

tion is not feasible, treatment equipment is ap-

plied.

Our oilseed processing plants operate six

electrostatic precipitators (ESP) for remov-

ing PM from boilers’ flue gases. These highly

efficient (95-98%) filtration devices use elec-

tric energy to generate an electrostatic charge

that captures fine particles. All grain handling

installations at silos and transshipment termi-

nals are equipped with cyclone filters.

In FY2024, Kernel paid a total of USD 487

thousand in environmental tax, of which USD

439 thousand for CO

emissions and USD 48

thousand for air-polluting emissions from sta-

tionary sources.

Emission reduction targets

In the Oilseed Processing segment, the com-

pany seeks to leverage its capacities of green

electricity production from biomass (sunflower

seed husk). In FY2024, Kernel’s Poltava Veg-

etable Oil Extraction Plant has committed to

the SBTi, becoming the first company in the

Ukrainian food industry to join this global initi-

ative. Kernel is exploring opportunities to fur-

ther decarbonize its processing activities, with

90% of the energy consumed by its plants al-

ready classified as low carbon. The remaining

energy consumption, related to Scope 2 elec-

tricity usage, could potentially be offset by al-

locating self-generated renewable electricity

for internal operations or sourcing external

low-carbon electricity through market instru-

ments such as Corporate Power Purchase

Agreements (PPAs). This approach aligns

with Kernel's commitment to achieving greater

sustainability and reducing its carbon foot-

print.

In Farming, Kernel aims to establish targets

of GHG emissions per ton of commodity in line

with SBTi FLAG guidelines. Setting up the op-

erational accounting of GHG emissions from

agriculture practices across fields and crops is

an important groundwork for the development

of ambitious and realistic emission reduction

targets.

Reduction of GHG emissions from agriculture

practices is achieved with carbon farming

practices, also known as regenerative agricul-

ture, namely reduced tillage, application of ni-

trification inhibitors, and introduction of cover

crops to crop rotations. According to prior es-

timations, such practices can potentially have

the following emission reduction capacity: (1)

nitrification inhibitors up to 10% reduction, (2)

cover crops up to 31% reduction and (3) re-

duced tillage up to 85% reduction.

The majority of Kernel’s landbank (more than

90%) is already cultivated with reduced tech-

nology. As of FY2024, the area under cover

crops accounted for around 35 thousand ha.

As per the methodological approach for set-

ting emission reduction targets, Kernel will rely

on the SBTi Forest, Land, and Agriculture

(FLAG) guidance. In line with this guidance,

Kernel would seek to set two categories of

emission reduction targets: an absolute target

and specific targets for each key crop. How-

ever, due to the uncertainty resulting from

Russia's invasion of Ukraine and ongoing mil-

itary actions, the company had to postpone

any decision-making on emission reduction

targets until the next two years. Nevertheless,

the company continues to work on research-

ing business opportunities related to the de-

carbonization of its operations and remains

committed to its climate ambition.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Human capital

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Human capital

General employment information

Our management approach to employment

and human resources

Kernel’s approach towards managing human

resources is defined by the Code of Conduct

and is built on four principles, namely (1) in-

volvement as internal entrepreneurship, (2)

partnership and unity of goals (3) mutual re-

spect and trust, and (4) development of hu-

man potential. Our practices are strictly

aligned with the Labor Code of Ukraine and

other relevant national legislatures as well as

the International Labor Organization’s

(ILO) Fundamental Conventions.

We expect the same level of responsibility re-

garding relations with employees throughout

our supply chain. Our counterparties are obli-

gated to comply with our Code of interaction

with suppliers, which requires them to ensure

fair and safe working conditions for their em-

ployees and compliance with labor legislation.

These requirements are reflected in the rele-

vant contractual provisions.

We are committed to providing our employees

with safe working conditions, strictly adhering

to the regulations of occupational health and

safety and the other relevant requirements; re-

spective working hours; competitive, transpar-

ent remuneration and benefits (including all

salary-related taxes and social contributions);

support with childbirth and proper parental

leave. Kernel has zero tolerance for any form

of forced or compulsory labor or child labor.

As a result of an effective human resources

management system, Kernel demonstrates

low employee turnover (13% in FY2024),

which indicates high levels of satisfaction, loy-

alty, and engagement among employees. Es-

pecially in terms of the Russian invasion of

Ukraine, Kernel’s main HR priority has been

scaling up the approach to retaining existing

staff and enhancing the competencies of en-

gaged employees.

Remuneration approach and benefits

In FY2024 Kernel’s total payroll accounted for

a total of USD 260 million; 487 employees

were receiving minimum wage (281 FTE ba-

sis). Overall, our remuneration is built on three

pillars, namely:

1. Base compensation and benefits. The

basic level of Kernel’s remuneration system

includes:

− salaries and wage-based bonuses, that

match or exceed the benchmark of

other industries. It also includes addi-

tional payments and compensations,

depending on working conditions, as

well as fixed payments in case of retire-

ment and financial support in case of an

………………………………………………………………………………………………………………………………………….………..

Key human resources indicators

(as of 30 June)

FY2022

FY2023

FY2024

Total number of employees

10,223

10,733

10,904

including by geography:

Ukraine

10,180

10,691

10,851

Other countries

including by level:

Managers

870

885

879

Specialists

3,020

3,110

3,157

Workers

6,333

6,738

6,868

including by business segment:

Oilseed Processing

2,291

2,530

2,479

Infrastructure and Trading

2,679

2,741

2,894

Farming

4,366

4,508

4,527

Head office and other

887

954

965

including by age

less than 30 years old

1,464

1,585

1,548

up to 50 years old

6,271

2,992

6,110

more than 50 years old

2,488

6,156

3,246

including by employment contract, by region:

Permanent

9,647

10,077

10,259

Ukraine

9,604

10,035

10,206

Other countries

Seasonal and temporary

576

656

645

Ukraine

576

656

645

Other countries

including by employment contract, by gender:

Permanent

9,647

10,077

10,259

Male

6,876

7,347

7,469

Female

2,771

2,730

2,790

Seasonal and Temporary

576

656

645

Male

510

586

580

Female

including by employment type, by gender:

Full-time

7,296

10,647

10,817

Male

5,461

7,877

7,987

Female

1,835

2,770

2,830

Part-time

Male

Female

………………………………………………………………………………………………………………………………………….……

Parental leave indicators in FY2024

223 60

135

Employees that were entitled to parental leave

Employees that took parental leave

Employees that returned to work in the

reporting period after parental leave ended

Employees due to return to work after taking

parental leave

Employees that were still employed 12 months

after their return to work

Male Female

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Human capital continued

Management

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employee’s difficult personal circum-

stances. When personnel optimization

takes place, resulting in a reduction in

the number of employees, the wage

fund is not reduced correspondingly but

is distributed among the rest of the

team.

− healthcare services, including voluntary

medical insurance for full-time employ-

ees, life insurance for employees, who

cover insurance costs, and OHS insur-

ance.

− rewards for improvements in produc-

tion, both monetary (such as one-time

monetary incentives for operational ac-

complishments) and non-financial

recognitions.

− other benefits include sponsorship of

educational opportunities and sports

activities, provision of food at work-

places, free transportation to work, etc.

2. Reward for leadership. Each year, em-

ployees undergo an assessment of their

competencies, both self-assessment and

evaluation by a linear manager. Based on

the results, employees’ base salaries may

be reviewed (more information on annual

performance appraisal and career advance-

ment in the section Training and career ad-

vancement)

3. Incentive system. This system aims to en-

sure that the career goals of our employees,

business targets of business divisions, and

long-term strategic goals of the Company

are synchronized. Kernel annually estab-

lishes financial and operational quantitative

and qualitative goals, which are cascaded

down to specific KPIs of employees in rele-

vant business segments. Employees can

also establish their own KPIs. Annual per-

formance assessment quantifies the

achievement of KPIs and automatically

impacts the size of the annual performance

bonus. The system is fully transparent and

prevents any prejudice. We provide em-

ployees with all the tools to directly affect

KPIs and monitor the KPIs’ execution on a

close-to-online basis.

Support of employees during wartime

The safety and well-being of our employees

have been the utmost priority amid military ac-

tions in Ukraine resulting from Russia’s inva-

sion. In FY2024, Kernel continued providing

extensive support to its employees, especially

those who are defending the country or who

are internally displaced.

During FY2024, 143 of our employees were

enlisted in the Armed Forces of Ukraine,

whereas 73 employees were demobilized.

The total monetary support provided to en-

listed employees over FY2024 amounted to

USD 4,508 thousand. As of 30 June 2024, 776

of our employees are serving in the Armed

Forces of Ukraine.

Furthermore, in FY2024, Kernel provided

USD 682 thousand of financial support to em-

ployees who suffered disability as a result of

military actions and the families of employees

who were killed in action. In addition, employ-

ees who had a newborn child in FY2024 re-

ceived USD 3.1 thousand in material assis-

tance.

Kernel has also been assisting employees liv-

ing in regions close to the frontlines by trans-

ferring them to safer cities and employing

them at other production assets of the Group.

In FY2024, we transferred 40 workers from the

no longer operational Vovchansk and Pry-

kolotne oil extraction plants in the Kharkiv re-

gion.

Moreover, Kernel continued showing its com-

mitment to employees' mental health through

its comprehensive Mental Health program,

available across all regions. This program

aims to activate employees' internal resources

and provide additional support for enhancing

their mental, social, physical, and creative

well-being. It fosters a culture of self-care, par-

ticularly for those in small towns and rural ar-

eas, and addresses the stigma around seek-

ing psychological support. The program in-

cludes both theoretical components, such as

webinars, and practical activities, such as

sports, sessions with psychologists, and a

………………………………………………………………………………………………………………………………………….……....

Key employment indicators in FY2024

Total number of new hires

2,464

by geography

Ukraine

2,456

Other countries

by gender

Male

1,745

Female

717

by age

less than 30 years old

735

up to 50 years old

1,320

more than 50 years old

407

Total number of employee turnover

1,4918

by gender

Male

1,073

Female

418

by age

less than 30 years old

320

up to 50 years old

411

more than 50 years old

760

Total number of employees that left Kernel due to retirement

………………………………………………………………………………………………………………………………………….………..

Key training and education indicators

FY2022

FY2023

FY2024

Average hours of training per employee

22.8

30.4

27.2

by gender:

Average hours of training per male

25.1

29.9

28.3

Average hours of training per female

18.4

31.4

27.8

by employee category:

Average hours of training per manager

35.8

39.1

34.8

Average hours of training per specialist

32.7

40.0

34.0

Average hours of training per worker

7.9

18.8

19.3

Total number of training hours

152,804

207,596

200,188

including by skill sets

Hard skills

111,309

161,037

128,298

Soft skills

41,495

46,559

71,890

including by learning formats

Full-time training

21,964

63,293

60,120

Distance Learning

130,840

144,303

140,067

including by frequency

Annual / regular training

67,507

95,758

41,508

One-time training

79,417

108,746

151,732

Modular development programs

5,880

3,092

6,948

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Human capital continued

Management

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cinema club. It has successfully met all its key

performance indicators (KPIs): turnover rate

has decreased by 5%, over 70% of employees

participate in program events, the number of

requests for psychological support has tripled,

and the project's Net Promoter Score (NPS)

has reached 98.5.

Integration of veterans back into civilian

life

As the wartime context became closely inter-

linked with the company’s everyday life, last

year Kernel started an adaptation program for

veterans with the primary focus on the com-

pany’s employees who were demobilized and

going back to civilian life. The program seeks

to help veterans in their self-realization and

smooth integration into business processes. It

consists of three key components, namely: (1)

physical recovery, including compensation of

costs of medical treatment and prosthetics; (2)

mental recovery involving tailored work with

professional psychologists; (3) integration into

the workplace, which also implies specific

training on communication skills and ethics for

other employees. The latter might also include

alterations of a working place or machinery to

accommodate a person’s prosthetics. Upon

return to work, veterans may also change their

previous professional qualifications with spe-

cial support from the HR department. Kernel’s

veterans’ adaptation program was recognized

in Forbes Ukraine's Top-25 rating.

As of FY2024, Kernel Group employs 90 vet-

erans, with the integration program involving

over 400 participants, including HR managers,

top managers, and colleagues. The program

includes a mandatory protocol for managers

who supervise veterans, requiring regular

face-to-face meetings to review professional

performance, KPIs, personal needs, and,

most importantly, to provide care and mental

health support. Managers are responsible for

monitoring the well-being of veterans and of-

fering timely assistance. Additionally, Kernel

facilitates and supports gatherings for the cor-

porate veteran community, including a dedi-

cated networking channel for veterans on Tel-

egram and occasional offline events. For ex-

ample, at the end of FY2024, we organized a

fishing trip, and recently, veterans attended a

special therapeutic performance at the Kyiv

Theater as part of an experimental healing

practice. These interactions help us to receive

feedback, better understand needs, and pro-

pose effective solutions.

New incentive program “Synergy of

Change”

Last year, Kernel launched the “Synergy of

Change” incentive program, designed to max-

imize operational efficiency across business

segments. The program offers employees the

opportunity to submit their ideas and be re-

warded if their suggestions increase the com-

pany’s EBITDA. In FY2024, employees sub-

mitted over 100 ideas, many of which received

support from top management. These ideas

focused on enhancing supply chain efficiency,

improving oil extraction processes, and opti-

mizing reproduction costs. Several of these

ideas were successfully implemented, and the

employees contributing were awarded one-

time bonuses. Therefore, Kernel plans to con-

tinue this initiative, as management believes it

positively impacts corporate values.

Training and career advancement

Our management approach to training and

performance review

We manage the professional development of

our employees based on the Competency

Model. This model comprises eight key com-

petencies established in line with Kernel’s

business strategy, priorities, and targets to

maximize the Group’s long-term value. These

competencies were identified through com-

pany-wide research, focusing on the behav-

ioral traits that managers across various busi-

ness segments and operational levels value

and promote in their teams.

Kernel’s key professional competencies are

the following:

1. Strategic thinking

2. Performance management

3. Organization of a unit’s work

4. Responsibility

5. Readiness to change

6. Cooperation

7. Systematic thinking

8. Continuous improvement

Employees covered by the Competency

Model undertake an annual assessment, after

which they create an individual development

plan. The individual development plan con-

sists of three parts: (1) hard learning, which

provides for the attraction of internal or exter-

nal experts and the allocation of individual

learning budgets; (2) soft learning, which is

realized through Kernel’s Institute of Internal

Couches; and (3) distance learning, which em-

ployees can access through an online educa-

tional platform, Kernel Hub, which provides

more than 1,000 e-books, 155 e-courses, and

200 training videos.

Together, these learning activities form the

corporate minimum package, which includes

one professional course and at least three

general development courses. The compe-

tency model applies to both managers and

specialists, ensuring that all employees re-

ceive professional education tailored to their

development plans and job descriptions,

which outline standard skill requirements for

each position.

In FY2024, Kernel overhauled its annual per-

formance appraisal system to better support

employee competency development. The new

approach encourages employees to partici-

pate in investment projects that address key

business challenges across various areas,

fostering the formation of cross-functional

teams. Each employee received a “goal map”

outlining their specific objectives for the pro-

ject, while team leaders assigned clear, digital

tasks to each member. This structure not only

facilitates competency improvements but also

allows employees to earn bonuses based on

their contributions.

Starting next season, competency assess-

ments will involve four parties: employees, two

managers, and colleagues. Previously, col-

leagues did not participate in each other’s

evaluations. Additionally, in FY2024, Kernel

introduced a chatbot for competency assess-

ments, enabling employees without a Kernel

system account to complete evaluations

seamlessly. Feedback collection has also

been significantly enhanced, now occurring

twice annually – in winter and summer – to

provide more timely and actionable insights for

employee development.

………………………………………………………………………………………………………………………………………….………….

Kernel’s annual performance appraisal system

Annual performance

appraisal

Competency

assessment

Competency assessment

Individual development

plan

Performance

assessment

KPI

assessment

KPI

setting

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

Human capital continued

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During FY2024, 3,539 employees evaluated

their competencies and created individual de-

velopment plans. Throughout the year, 7,373

employees benefited from Kernel’s educa-

tional programs, spending 200,188 hours of

training (an average of 27.2 hours per em-

ployee), 64% of which were dedicated to im-

proving hard skills and 36% to improving soft

skills. Furthermore, 8,800 employees en-

gaged in at least one course on Kernel Hub,

our online educational platform.

Beyond competency assessments, employ-

ees undergo annual performance (KPI) evalu-

ations through a dedicated digital system.

Based on these evaluations, managers pro-

vide feedback and consultations on career de-

velopment and review KPIs for the next finan-

cial year. Both competency and performance

assessment mechanisms are key pillars in

Kernel’s annual performance appraisal sys-

tem.

Kernel’s overall expenditure on training and

education of its employees in FY2024 ac-

counted for USD 329 thousand.

Assistance with career growth and upgrad-

ing skills of our employees

Kernel has developed two programs to sup-

port employees’ professional growth and ca-

reer advancement, namely Kernel Growth and

Kernel Leadership. These programs are fun-

damental pillars of the ‘Talent Pool’ project,

which aims to create structured pathways for

personnel advancement to top-management

positions: (1) under Kernel Leadership heads

of departments who aspire to become top

managers, receive tailored training, mentor-

ship from acting top managers, and assis-

tance from coaches of personal development;

whereas (2) Kernel Growth covers middle-

level managers and specialists, who are moti-

vated to actively build their career at Kernel.

To participate in either program, employees

undergo several selection stages that include

analytical tests and business cases. In

FY2024, the second wave of the Kernel

Growth program was launched with 54 partic-

ipants, while the Kernel Leadership project is

currently mentoring 71 successors.

Additionally, in FY2024, Kernel initiated the

selection process for the Agronomist and En-

gineer programs within the agribusiness sec-

tor and launched a project to form a ‘Talent

Pool’ for agricultural services. The students of

these programs are intended to fill positions

such as Lead Agronomist, Chief Agronomist,

and Cluster Production Deputy. By the end of

the reporting year, we had 54 candidates for

Before entering our working sites, any visitor or worker is briefed with description of the OHS risk identification and management system; they are also required to

take an OHS e-course.

selection. Furthermore, Kernel Growth for Si-

los has successfully trained 32 employees,

who have now completed both their theoreti-

cal and practical components. The Talent Re-

serve Project aims to prepare candidates for

the roles of Senior engineer and Silo Manager

within the Storage Division. Currently, the pro-

ject involves 32 participants divided into two

groups. Each group has completed a series of

training modules - one group finishing 7 mod-

ules and the other 6, totaling 104 hours. Group

1 gained valuable hands-on experience

through practical training in production labora-

tories, applying their skills in real work condi-

tions. Both groups concluded their internships

as Senior Masters in June 2024.

Training to adapt to external challenges

We envision training and professional devel-

opment as integral components of our human

capital, empowering our ability to create long-

term value and strengthen our adaptability to

external risks and challenges. Amid wartime in

Ukraine, Kernel takes active steps to adapt to

new conditions. To ensure continuity of pro-

cessing during martial law and ongoing mobi-

lization to the Armed Forces, the company is

building up the personnel reserve by training

additional employees for the following two

groups of positions: (1) directors of silos and

(2) leading power engineers, mechanics and

head of laboratory. In addition, since the be-

ginning of the Russian invasion of Ukraine,

Kernel has launched training on tactical medi-

cine accessible to all employees. The partici-

pants of this training learn how to provide first

aid in accordance with the Tactical Combat

Casualty Care protocol MARCH (the acronym

stands for the proper order of treatment,

namely massive hemorrhage, airway, respira-

tion, circulation, head injury/hypothermia). Our

employees have demonstrated significant

success in mastering the training, being able

to apply a tourniquet in 45 seconds. Moreover,

in FY2024 Kernel launched a project “At

height” together with the KRUK UAV operator

training center, which resulted in 473 trained

UAV operators, 10 of which are our employ-

ees.

Occupational health and safety

Our management approach to occupa-

tional health and safety

The cornerstone of our approach to managing

occupational health and safety (OHS) is the

aspiration to have no work-related injuries and

fatalities across all our working sites. We en-

sure that all employees are provided with ap-

propriate and safe working conditions in line

with Ukraine’s national labor legislation and

provisions of the International Labor Organi-

zation’s Fundamental Conventions. Our ap-

proach is enshrined in the Workplace health

and safety policy, which outlines the establish-

ment and continuous improvement of the oc-

cupational health and safety management

system (hereinafter – OHSMS). We expect the

same level of responsibility and dedication to

ensure occupational health and safety from

our suppliers: our agreements include a provi-

sion on compliance with Kernel’s Code of in-

teraction with suppliers. This code requires

our suppliers to provide their employees with

a safe working environment and have proper

OHS practices implemented. Our OHSMS en-

compasses all employees and contractors, in-

cluding those working on our sites with whom

we have limited functional control. To mini-

mize risks of work-related injuries among our

contractors, we provide them with comprehen-

sive training on OHS practices and require-

ments

. Additionally, we have appointed a

dedicated OHS specialist responsible for

managing an independent system that moni-

tors the implementation of OHS practices and

inspects compliance with safety requirements

across our investment projects. Contractors

are evaluated and ranked based on their OHS

performance, and repeated violations result in

penalties. In FY2024, there were no instances

of work-related injuries or fatalities among

contractors.

Kernel’s OHSMS operates in line with the re-

quirements of national regulations and ISO

45001 standards and is led by an OHS corpo-

rate manager who annually reports to a man-

agement committee headed by the company’s

CEO. Within the OHSMS, the process of iden-

tifying and assessing work-related hazards

……………………………………………………………………………………………………………………………………….………….

Key employees’ career development indicators

FY2022

FY2023

FY2024

Total number of employees, receiving regular

performance and career development reviews

1,777

1,647

1,676

including by gender

Male

1,393

1,273

1,270

Female

384

374

406

including by employee category

Managers

664

621

756

Specialists

1,113

1,026

920

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

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and safety risks is exercised on a non-routine

and annual basis. A non-routine procedure of

risk identification takes place for new business

operations and assets, and results in a list of

hazards and risks. The risk identification on an

annual basis is reflected in the responsibilities

of managers, OHS professionals, and other

employees to update the list of hazards, bas-

ing their inputs on results of internal and exter-

nal labor safety audits, the outcomes of em-

ployees’ engagement process, and feedback,

conclusions drawn from incidents investiga-

tions, as well as results of OHS assessments

and incorporation of world best practices.

OHS assessments include self-assessments

and statutory inspections, information on

which is consolidated in a special database.

Once potential risks and hazards are identi-

fied, the OHSMS triggers the procedure of risk

management which is organized in line with

the ERIC/PD

hierarchy of hazard controls

and consists of the following steps, taken in

descending priority:

• Fully eliminate a risk or a hazard

• Reduce the potential impact of a risk or a

hazard

• Isolate a risk or a hazard from employees

• Control a risk or a hazard, by providing em-

ployees with personal protective equip-

ment, training, detailed instructions and in-

formation, means of first response, as well

as lockout/tagout devices.

In the event of work-related incidents, we

launch an investigation of each case, using

the Ishikawa, or ‘fishbone diagram’ approach

that aims: (1) to identify root causes of an in-

cident, (2) to map risks and hazards that ma-

terialized, (3) to determine corrective actions

in line with the ERIC/PD hierarchy of hazards

control, and (4) to integrate lessons learned

into required improvements of the OHSMS.

This information is diligently recorded in the

accident statistics, which also includes data on

the frequency of occupational accidents, sub-

sequent lost workdays, and the severity of in-

juries.

For every work-related accident, we create a

special investigation commission that might

also include representatives of relevant au-

thorities. As the result of an investigation the

commission issues a report detailing the cir-

cumstances of the incident and recommenda-

tions to improve the risk management ap-

proaches and to prevent the occurrence of

such incidents in the future. Such an approach

aims to ensure continuous improvement of the

OHS practices to achieve the central target of

zero work-related injuries and fatalities.

Acronym stands for Eliminate, Reduce, Isolate, Control, Personal Protective Equipment, Discipline.

These include key trading company Kernel-Trade, six oil extraction plants, two farming clusters, fifteen silos and one grain transshipment terminal.

As of FY2024, a total of 25 assets

were cer-

tified with ISO 45001 standards. In FY2024, all

covered employees were audited internally,

whereas 6,902 of them also underwent exter-

nal audit. The company’s dedication to occu-

pational health was evident in the extensive

audit activities carried out during the reporting

period. Internal audits, spanning 187 man-

days, were complemented by external audits

conducted by Bureau Veritas, which covered

an additional 20 man-days. In the reporting

year, Kernel introduced new safety protocols

in response to emerging risks identified

through internal and external audits. These

protocols included updated guidelines for han-

dling hazardous materials and emergency re-

sponse procedures.

The financial investment in occupational

health and safety was substantial, with ex-

penditures reaching USD 2.1 million. These

funds were allocated towards enhancing

safety infrastructure, training, and health ser-

vices for employees. Throughout the year,

Kernel conducted two state inspections, with

no fines being imposed, reflecting the com-

pany’s compliance with regulatory standards.

Regrettably, there was one fatality reported in

FY2024 among Kernel’s employees due to

non-compliance with safety measures. This

incident prompted a thorough review and en-

hancement of safety measures. In response,

Kernel has intensified training programs, par-

ticularly focusing on the importance of

compliance with safety procedures and has

strengthened its monitoring systems to pre-

vent future occurrences. Additionally, the

company has expanded its health resources

and support services to better cater to the

well-being of all employees.

Employee engagement and training on oc-

cupational health and safety

Training remained a cornerstone of the com-

pany’s safety strategy. In FY2024, 587 em-

ployees participated in offline occupational

health and safety (OH&S) training sessions,

accumulating a total of 9,648 hours of training.

Furthermore, 1,117 employees completed

online courses, broadening their knowledge

and skills in maintaining a safe working envi-

ronment. The company also conducted 1,069

emergency response drills, involving 2,427

personnel, to ensure readiness for any unfore-

seen incidents.

Employee involvement in safety management

was actively encouraged through various

channels. The “Near Miss”, “Stop Card”, and

“Walk The Talk” initiatives provided platforms

for employees to report safety concerns, sug-

gest improvements, and participate in safety

projects. Information on occupational health

and safety was disseminated through multiple

mediums, including the safety department, di-

rect supervisors, emails, phone calls, and ded-

icated on-site monitors. These efforts ensured

that all employees were informed and

………………………………………………………………………………………………………………………………………….…………

Key occupational health and safety indicators

(as of 30 June)

FY2022

FY2023

FY2024

Recordable work-related injuries

Oilseed Processing

Infrastructure and Trading

Farming

High-consequence work-related injuries (ex. Fa-

talities)

Oilseed Processing

Infrastructure and Trading

Farming

Fatalities resulted from work-related injuries

Oilseed Processing

Infrastructure and Trading

Farming

Rate of recordable work-related injuries (LTIFR)

0.22

0.50

0.81

Rate of fatalities as a result of work-related in-

jury

0.06

0.11

Rate of high-consequence work-related injuries

(excluding fatalities)

0.17

0.06

0.27

Workers covered by OHS management system

10,180

10,676

10,606

Workers covered by OHS management system,

who were audited internally

10,180

10,676

10,606

Workers covered by OHS management system,

who were verified internally and externally

7,358

4,585

6,902

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Human capital continued

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engaged in creating a safer workplace.

Our approach to employee engagement in im-

proving OHS practices is driven by behavioral

incentives and material nudges, motivating

staff to minimize and prevent hazardous situ-

ations. Such incentives include monitors in-

stalled at our production sites, which show a

current and record number of days without

work-related accidents, or monetary rewards

for the best ideas on labor safety improvement

and risk identification factors. In FY2024, Ker-

nel expanded its health and well-being pro-

grams, offering free health screenings and

mental health support services to employees

and their families, aiming to improve overall

employee well-being and reduce work-related

stress.

We employ proactive methods to engage our

employees in the development, implementa-

tion, and evaluation of the effectiveness of the

OHSMS, as well as to communicate OHS in-

formation, namely via corporate surveys, the

‘Gold Safety Rules’ initiative, and the ‘Walk the

Talk’ project

At Kernel, any employee can flag and report

occupational health and safety risks they ob-

serve and report about hazardous situations

on a worksite by reaching out to their supervi-

sor, field OHS specialist, or the company’s

corporate manager. Employees can also raise

any OHS issues by submitting a ‘Near Miss’

and ‘Stop Card’ letterforms or contacting the

corporate Hotmail. The reporting of 3,894 near

misses over FY2024 was a testament to the

effectiveness of the hazard identification pro-

cesses in place. 99% of these near misses

were resolved, demonstrating a strong com-

mitment to mitigating potential risks. Addition-

ally, 912 Walk the Talk sessions were held,

providing employees with the opportunity to

engage in discussions about safety improve-

ments. Workplace health and safety policy en-

sures the protection of whistleblowers from

any form of retaliation.

Kernel’s OHS training program allows our em-

ployees to deepen their understanding of key

principles in labor safety and OHSMS while

gaining specific skills to prevent, minimize,

and appropriately respond to hazardous situ-

ations on worksites. All employees are obli-

gated to take OHS e-learning courses (a gen-

eral course for all employees and specialized

courses tailored to different business opera-

tions and professions) followed by a test. Em-

ployees involved in high-risk work take man-

datory specialized training, followed by exams

and authorization to begin work. In addition,

‘Gold Safety Rules’ initiative recognizes best set of labor safety requirements, composed by employees themselves; ‘Walk the Talk’ projects was launched to allow

OHS specialists and manager explore gaps in OHSMS by interviewing employees and discussing their ideas on improvements.

Luxembourg Law of 23 July 2016 on disclosure of non-financial and diversity information, implementing the European Directive 2014/95/EU.

Kernel provides employees with training on

appropriate response actions in dangerous

situations, such as fire, that involve state res-

cue services and specialized equipment.

Human rights, diversity, and inclusion

Kernel has an unwavering commitment to hu-

man rights, which is a fundamental principle

employed at every corporate level and extrap-

olated to our suppliers and business partners.

Our position on internationally proclaimed hu-

man rights is defined in our Sustainability de-

velopment and corporate social responsibility

policy and aligned with the principles of the UN

Global Compact, which Kernel signed in

2020.

As a signatory, Kernel is dedicated to safe-

guarding human rights and equal opportuni-

ties for women, persons with disabilities, local

opportunities, smallholder farmers, and work-

ers, including those under temporary con-

tracts, sub-contractors, and migrant workers.

We are also committed to not undertaking any

activities that have a negative impact on the

human rights of children and indigenous peo-

ple. Indeed, there is no forced or child labor

involved in any of Kernel’s operations; the

company was not complicit and did not commit

violations of any other human rights in the re-

ported period. We annually report our perfor-

mance as part of the Communication on Pro-

gress on the UN Global Compact.

Our suppliers and business partners are

equally obligated to respect human rights as

part of their mandatory compliance with Ker-

nel’s Code of interaction with suppliers, a

mandatory compliance requirement included

in all agreements with counterparties. The

Code requires our counterparties to ensure

equal opportunities for their employees, diver-

sity, and a ban on forced and child labor in

their operations.

At Kernel, we believe in respect for diversity

among our employees as one of the funda-

mental human rights and freedoms, and its

empowerment is integral for ensuring our suc-

cess, market competitiveness, and long-term

value for our stakeholders. Our approach to

safeguarding equal opportunities and a non-

discriminatory working environment is guided

by the Luxembourg Law of 23 July 2016

and

our Anti-Discrimination and Diversity, Equality

and Inclusion (hereinafter – DE&I policy) poli-

cies.

In line with DE&I policy, Kernel aspires to

reach at least 30% representation of each

gender within the company’s corporate bod-

ies, namely the Board of Directors and the Ex-

ecutive Management Team. We have desig-

nated individuals and teams responsible for

implementing the DE&I Policy at every corpo-

rate level, ensuring the adoption of diversity,

equality, and inclusion principles in all busi-

ness activities of Kernel. At the Board of Di-

rectors’ level, matters related to the integration

of diversity principles are overseen by the

……………………………………………………………………………………………………………………………………….…………

Key diversity and equality indicators

(as of 30 June)

FY2022

FY2023

FY2024

Percentage distribution of individuals within the Board of Directors

by gender

Male

50%

62%

75%

Female

50%

38%

25%

by age

30-50 years old

75%

88%

more than 50 years old

25%

13%

Percentage distribution of individuals within the Executive Management Team

by gender

Male

67%

80%

Female

33%

20%

by age

30-50 years old

87%

more than 50 years old

13%

Percentage distribution of individuals among employees

by gender

Male

72%

74%

Female

28%

26%

by age

less than 30 years old

14%

15%

14%

up to 50 years old

61%

28%

56%

more than 50 years old

24%

57%

30%

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

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Nomination and Remuneration Committee,

whereas the Chief Executive Officer is respon-

sible for the implementation of the DE&I Policy

throughout the company Additionally, in

FY2024, Kernel surveyed gender equality

among workers. The results showed that 97%

of employees are confident that the Group is

committed to cultural diversity and equal op-

portunities and that their working environment

supports gender equality.

Under the Anti-discrimination policy, we are

committed to ensuring equal employment op-

portunities and a non-discriminatory working

environment for all categories of individuals. In

FY2024, the share of socially vulnerable em-

ployees was 8% out of the total number of em-

ployees, and 5% of all employees were indi-

viduals with disabilities.

Kernel has a grievance mechanism through

which the company’s employees and counter-

parties have an opportunity to submit com-

plaints related to human rights violations or

discriminatory actions, as well as to receive re-

dress if an investigation determines that such

violations took place

Freedom of association and collective

bargaining

At Kernel, we believe that every employee has

a right to be a part of associations and collec-

tive bargaining agreements. Our stance is de-

lineated in the Freedom of associations and

unions policy and aligned with the principle of

the UN Global Compact to uphold the free-

dom of associations and the effective

recognition of the right to collective bar-

gaining. As of the end of FY2024, 89% of our

employees were covered by collective bar-

gaining, and 6% of all employees were mem-

bers of the trade union.

Submissions to the grievance mechanism can be made via (1) a toll-free round-the-clock hotline, (2) form on Kernel’s website, (3) via email by writing to hotline@ker-

nel.lu or compliance@kernel.lu, (4) Telegram chatbot ‘KernelHotline’.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Social capital

Management

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Corporate

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Social capital

Anti-corruption and compliance

Our management approach to anti-corrup-

tion

At Kernel, we have zero tolerance for any

fraudulent and corrupt activities, both among

our employees and counterparties. Our posi-

tion on anti-corruption and approach towards

ensuring ethical compliance is embodied in

Kernel’s Corporate Governance Charter,

Code of Conduct, Anti-corruption policy,

and

Code of Interaction with Suppliers. In addition,

all our agreements and tendering processes

include the Anti-corruption clause.

The requirements to adhere to our anti-corrup-

tion rules also apply to our partners in the

Open Agribusiness project (i.e. small farmers

cannot participate in our programs if their land

lease agreements are not properly registered,

their crop sales and business processes are

not formalized, also if they are found to be in-

volved in shadow operations or avoid paying

taxes); and students of Kernel’s Open Agro

University, who might be employed at the

company after graduation. Responsibility to

enforce provisions of these documents cen-

trally lies on Kernel’s compliance officer, who

reports directly to the CEO and the Audit Com-

mittee on the Board of Directors, whereas the

corporate culture of integrity and compliance

is driven by the «Tone at the Top» principle.

There are also regional compliance coordina-

tors, whose role is to implement anti-corrup-

tion and compliance standards, as well as en-

sure ongoing improvement of ethically correct

corporate culture on Kernel’s operational as-

sets. The compliance officer is also responsi-

ble for the provision of confidential advice on

compliance practices to Kernel’s employees

at their request. In FY2024, there were 49

such requests.

Kernel is also a member of several profes-

sional associations and international initia-

tives, under which the company made public

commitments to promote transparency and

zero tolerance for fraudulent activities. Kernel

is a member of the Ukrainian Network of In-

tegrity and Compliance (UNIC) and a signa-

tory to the UN Global Compact and the UN

Anti-corruption Collective Action Memo-

randum. Additionally, for Kernel, these plat-

forms are effective ways to exchange best cor-

ruption prevention practices between busi-

nesses and to drive the corporate culture of

integrity in the agriculture sector.

Identification and prevention of corruption

risks

Anti-corruption policy is aligned with requirements of national legislation, the US Foreign policy Corrupt Practices Act (FCPA), the UK Bribery Act (UKBA), the Con-

vention on Combating Bribery of Foreign Public Officials in International Business Transactions, and reflects provisions of anti-corruption legislation of the countries

with Kernel’s presence

In FY2024, Kernel continued strengthening its

compliance framework and anti-corruption

measures, while also achieving significant

milestones across various initiatives. All our

operations are regularly screened against

risks of corruption. The company identified a

total of 19 risks; the most significant risks in-

clude: (1) obtaining undue benefits, that might

lead to financial losses and reputational dam-

ages; (2) conflict of interest; (3) work for other

companies and entrepreneurial activities.

Managers and specialists are obligated to un-

dergo annual conflict of interest declarations,

and all employees are trained to recognize

and mitigate potential conflicts. Screening for

corruption risks is also integral to Kernel's hir-

ing process, particularly for candidates with

governmental backgrounds.

Regarding the identification of corruption inci-

dents among counterparties, Kernel's security

department conducted 116 compliance KYC

(Know Your Customer) assessments for all

counterparties. This department also pro-

cessed all 960 signals received via the Hotline

according to established procedures involving

compliance officers for additional scrutiny in

cases of medium or high corruption risks, con-

flicts of interest, or concerns about interna-

tional sanctions (116 cases in FY2024). The

compliance manager verifies contracts, espe-

cially when amendments to the Anti-corruption

clause are proposed (98 cases in FY2024).

Dedicated channels, including anonymous re-

porting, allow stakeholders to raise concerns

about corruption risks, all managed by the

compliance officer with protection in place for

whistleblowers.

The implementation of electronic conflict of in-

terest declarations, now available at any time,

was a significant improvement over the last re-

porting period. A webinar on conflict of interest

was conducted for all employees to enhance

awareness and understanding of the new pro-

cess. Conflict situations identified through an-

nual declarations were promptly addressed,

with 36 compliance checks conducted for job

candidates to mitigate conflicts of interest.

Furthermore, in FY2024, Kernel conducted an

ethics and compliance survey, revealing

100% awareness among workers, specialists,

and managers regarding Kernel's internal

standards, policies, and controls in compli-

ance, anti-corruption, and corporate ethics.

Our anticorruption practices and approaches

to enhancement of the culture of transparency

and integrity are demonstrating positive re-

sults. Over the last four years, the occurrence

of corruption has been steadily declining. In

FY2024, a total of 55 cases of corruption were

confirmed. Incidents of theft by employees

have decreased by 38% compared to the pre-

vious reporting period and accounted for 37

cases in FY2024.

In FY2024, all internal compliance documents

have been fully updated to adhere to the leg-

islative and regulatory standards. The thor-

ough updating of the Anti-corruption policy led

to practical improvements within the com-

pany’s corporate structure. Additionally, a

comprehensive Sanctions Policy was devel-

oped, implemented, and effectively communi-

cated to all employees. This policy plays a cru-

cial role in managing critical issues such as

exports to sanctioned countries. It provides

Kernel’s partners with a clear understanding of

the Group's position on sanctions regulations,

including those imposed as the result of the

Russian invasion of Ukraine.

Kernel’s leadership in compliance was further

demonstrated through the launch of the Part-

ner Compliance Program, featuring the

………………………………………………………………………………………………………………………………………….…………

Key anti

-corruption and compliance indicators in FY2024

(as of 30 June 2024)

Number of confirmed incidents of corruption

Number of employees dismissed for corruption

Number of public legal cases on corruption brought against Kernel

Number of confirmed incidents of contracts with business partners being termi-

nated due to corruption

Total number of submissions to Kernel’s channels of informing on misconduct

Total number of managers and specialists who completed the procedure on dec-

laration of conflicts of interest

2,854

Total number of employees who took anti-corruption trainings

123

by employee category

Managers

Specialists under high compliance risks

Workers

Total number of Open Agro University students who took anti-corruption trainings

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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nel.ua

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School of Integrity, accessible on Kernel’s

website. This initiative aims to promote a cul-

ture of compliance among partners and stake-

holders, enhancing transparency and ethical

practices throughout operations. The Group's

commitment to ethical standards and regula-

tory compliance is evident in its continuous ed-

ucation efforts and the seamless integration of

compliance measures into daily operational

activities.

Our actions on gender-based violence

Throughout FY2024, Kernel proactively pro-

moted gender equality and took steps to pre-

vent gender-based violence. We introduced

new posters around our offices highlighting is-

sues of gender and domestic violence, aiming

to raise awareness of available support and

protection services. Additionally, we partici-

pated in the international corporate flash mob

event ‘The 16 Days Against Violence,’ which

began on the International Day for the Elimi-

nation of Violence against Women (November

25th). As part of this initiative, employees wore

orange clothing, symbolizing the campaign,

and shared their support on social media us-

ing the hashtag #WeAreAgainstViolence. This

flash-mob aimed to spotlight the critical issue

of violence and emphasize that help is always

available.

Economic performance and impact

Economic performance is the most important

KPI managing the performance-based part of

compensation. As a diversified agro-industrial

business in Ukraine with leading positions

across all business segments, we generate a

significant direct economic impact on our

stakeholders in areas of all our operations. Di-

rect economic impact includes our purchasing

of goods from suppliers, dividends paid to

shareholders, wages and benefits paid to our

employees, financial expenses paid to credi-

tors, income taxes paid to the public sector,

and community investments. Additionally,

economic value is retained for reinvestment,

aimed at increasing the company's capitaliza-

tion and supporting future growth.

EU Taxonomy

Kernel reports its contribution to the European

Union’s environmental objectives of climate

change mitigation and climate change adapta-

tion in line with the guidelines laid down in the

EU Taxonomy regulations. In response to

these requirements, we have undertaken a

comprehensive analysis of our economic ac-

tivities, the revenue they generate as well as

our capital (CapEx) and operational (OpEx)

expenditures. Besides, we identified the share

of activities that meet the EU Taxonomy crite-

ria or, in other words, are considered

NACE code D35.11 in accordance with the statistical classification of economic activities, established by Regulation EC No 1893/2006

‘environmentally sustainable’.

The identified taxonomy-eligible economic ac-

tivity falls under the category ‘Electricity gen-

eration from bioenergy’

and refers to the

production of electricity from biomass, namely

sunflower seed husk, at our co-generation

heat and power (CHP) plants. This ‘green

CapEx’ investment project, launched in 2017

and completed in 2024, resulted in six CHP

units with a combined electricity generation

capacity of 84.4 MW.

Our taxonomy-eligible activity has the poten-

tial to save up to 700 thousand tCO2e of na-

tional emissions every year, contributing sig-

nificantly to Ukraine’s transition to a net-zero

emissions economy. As of FY2024 Kernel has

been operating five CHPs with the last plant to

be commissioned in FY2025.

Support of local communities and so-

ciety as a whole

Our management approach toward social

impact

At Kernel, we are driven to maximize our

positive social impact within the area of our

biggest expertise by sharing our knowledge

and experience with farmers and educating fu-

ture generations of specialists in agriculture

and food sectors. We strive to be a responsi-

ble neighbor and reputable partner to local

communities and support the Ukrainian soci-

ety overall. These priorities are reflected in our

Sustainable development and corporate so-

cial responsibility policy. The company’s ap-

proach towards effective interaction with dif-

ferent groups of stakeholders is guided by the

Stakeholder engagement policy aligned with

the IFC’s performance standard, which in-

cludes an extensive plan of our interactions

with key stakeholders like local communities.

Responsibility for identification and practical

interaction with stakeholders lies in a team of

assets-based public relations managers, who

act as Kernel’s representatives in regions,

communicating with landowners, local offi-

cials, and the media. They also reach out to

communities in rural regions, helping them

with employment on Kernel’s assets, as well

as coordinating our regional social projects

………………………………………………………………………………………………………………………………………….……..

Taxonomy

-eligible share of Kernel’s economic activities

FY2023

FY2024

USD million

Amount

Revenue, including

3,455.0

100.00%

3,581.0

100.00%

taxonomy-eligible

28.8

0.83%

48.7

1.36%

taxonomy non-eligible

3,426.2

99.17%

3,532.3

98.64%

Capital expenditure

, including

101.2

100.00%

158.8

100.00%

taxonomy-eligible

5.4

5.32%

5.7

3.58%

taxonomy non-eligible

95.8

94.68%

153.1

96.42%

Operational expenditure, including

2,955.0

100.00%

3,176.0

100.00%

taxonomy-eligible

18.3

0.62%

24.0

0.76%

taxonomy non-eligible

2,936.7

99.38%

3,152.0

99.24%

Note 1: Additions in CIP and uninstalled equipment for the respective period (Note 15).

………………………………………………………………………………………………………………………………………….………..

Key economic performance indicators

USD million

FY2022

FY2023

FY2024

Direct economic value generated

5,409

3,394

3,642

Revenue

5,332

3,455

3,581

Net IAS 41 effect

(115)

(10)

Other operating income

Economic value distributed

Operating costs, of which

(5,317)

(2,955)

(3,366)

employee wages and benefits

(245)

(229)

(257)

Finance costs

(119)

(122)

(69)

Community investments

(26)

(12)

(25)

Other costs

Total charges

(5,453)

(3,026)

(3,431)

Income tax

(69)

(43)

Dividends paid

(34)

Total economic value distributed

(5,484)

(3,095)

(3,474)

Economic value retained

(75)

299

168

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Social capital continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

and initiatives. Communication with represent-

atives of local communities and other stake-

holders is also performed via dedicated chan-

nels of information, and grievance mecha-

nisms, through which they can submit their in-

quiries and receive extensive feedback (in

FY2024 we received a total of 705 calls via a

toll-free hotline).

Support of the Armed Forces of Ukraine

and the society in wartime

People have always been the main value for

Kernel and our mission to ensure their safety

and wellbeing have been of highest priority

amid wartime in Ukraine. From the beginning

of Russia’s full-scale invasion of Ukraine, Ker-

nel has been taking a leadership position

among Ukrainian businesses in providing help

and support to the Ukrainian society and the

army during wartime. Our support has been

both financial, such as purchases of military

equipment, medicine, and cars, and non-mon-

etary, namely humanitarian aid directed to the

army and internally displaced people, such as

food supplies and provision of temporary shel-

ter for internally displaced people.

Social projects and charity spending

We direct our charity and social investments

towards the following categories of projects:

• Infrastructure investments: maintenance

and repairs of roads, bridges, street lighting,

waterpipes, bus stops and others.

• Education: maintenance and repairs of

schools, kindergartens, and playgrounds;

providing necessary equipment to educa-

tional institutions.

• General charity: targeted support of land-

owners in need, orphanages, and nursing

homes, severely ill people, and cash dona-

tions to other charity organizations.

• Sport and culture: building and repairs of

libraries, athletic fields, community cultural

centers, and sacral buildings; supplying

equipment for gyms; sponsorship of sports

and cultural events.

• Healthcare: maintenance and renovation of

rural health posts and purchases of medical

equipment.

Educating the next generation of agricul-

ture specialists

In FY2024 Kernel continued its educational

project, Open Agro University, aimed to nur-

ture the next generation of agricultural profes-

sionals. This program focuses on seven key

agricultural, production, and technical profes-

sions, namely:

• Agronomist;

• Power engineer;

• Mechanical engineer in farming;

• Mechanical engineer in production;

• Engineers of process automated control

systems;

• Technology engineer in oil production;

• Technology engineer in laboratories and si-

los.

By FY2024, 45 students have successfully

graduated from the program, and 100 more

are currently enrolled. Graduates and stu-

dents receive high-quality education and

hands-on experience, preparing them for suc-

cessful careers in the agricultural sector. The

team of experts includes more than 100 Ker-

nel’s in-house experts, professors from

Ukraine’s leading universities, global produc-

ers of agriculture machinery, fertilizers and

crop protection agents, and international ex-

perts. Having successfully completed the pro-

gram, project participants become employed

at Kernel. The process of selecting the pro-

gram’s participants is inclusive and diversity-

driven, providing equal opportunities for can-

didates of different genders from different

background.

Sharing our expertise with farmers

Launched in 2018, Kernel’s Open Agribusi-

ness project is designed to help farmers in

Ukraine sustainably increase their yields and

improve technological and business manage-

ment approaches to reduce cost, maximize in-

come, and build resilience to risks and volatil-

ities. We share our expertise and provide

practical assistance to Open Agribusiness

partners. In return, they supply a minimum of

80% of their yields to Kernel. As of the end of

FY2024, the Open Agribusiness has 42 part-

ners, which cover a total of 148 thousand hec-

tares of landbank. Even during the war, Kernel

continued to support these partners with agro-

nomic consulting, technological mapping, and

productivity improvements.

In addition, over FY2024 Kernel continued de-

veloping the market-wide practice of

establishing Water Use Organizations

(WUOs). The idea behind WUOs is to unite

small- and medium-sized farmers and to sim-

plify their irrigation resources. Yes, as part of

the support for Law 2079-IX "On Water User

Organizations and the Stimulation of Land Hy-

drotechnical Reclamation" the Prydniprovskyi

cluster of Kernel (PrJSC "Prydniprovskyi

Krai") initiated the creation of two WUOs –

"Hradizka" in the Poltava region and

"Dmytrivska" in the Cherkasy region. The pro-

ject was supported by the public union "All-

Ukrainian Agrarian Council" and the European

Bank for Reconstruction and Development.

Interactions with suppliers

Quality interactions with suppliers are one of

the key aspects of Kernel’s ESG and climate

governance agenda. The main purpose is to

identify opportunities for cooperation, explore

ways to improve our climate-related perfor-

mance (reduction of Scope 3 GHG emis-

sions), and extrapolate our practices across

our supply chain, which includes suppliers of

grain and oilseed as well as our partners in the

Open Agribusiness program.

In FY2024 we continued to communicate with

our suppliers of nitrogen fertilizers to collect

data on carbon footprint for the purpose of

Scope 3 calculations. The purchase of fertiliz-

ers is one of the most material categories of

Kernel’s Scope 3 emissions and the purpose

of such interaction is to minimize the uncer-

tainty of calculations. In exchange, we are also

prepared to provide our data on GHG emis-

sions from the application of N-fertilizers and,

therefore, contribute to the advancement of

Scope 3 emissions accounting globally. We

believe that the collection of such data from

domestic producers of fertilizers will be simpli-

fied once companies begin reporting in line

………………………………………………………………………………………………………………………………………….……….

Key social impact indicators in FY2024

(as of 30 June 2024)

Total amount of social spendings

USD thousand

25,129

Non-material support of the Armed Forces of Ukraine

psc

Military helmets

Military uniform sets

3,390

Means of communication

Thermal imagers

157

Unmanned aerial vehicle (UAV)

Quadcopters

2,345

Air defense systems

Humanitarian aid

Sunflower oil, liters

3,394

Machinery and other aid, psc

423

Medical aid

Medicine and medical equipment, psc

1,654

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Social capital continued

Management

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Sustainability

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Corporate

Governance

Financial

Statements

with CBAM regulations (Carbon Border Ad-

justment Mechanism).

The purpose of this exercise, from the long-

term perspective, is also to identify ways to op-

timize the portfolio of suppliers to reduce the

carbon footprint of purchased fertilizers. This

would be an initial step in addressing one of

the climate transitional risks associated with

the target of the EU’s ‘Fit for 55’ package to

reduce emissions by 61% before 2030. Given

that the production of intermediates for nitro-

gen fertilizers, namely nitric acid, ammonia,

and hydrogen, is covered by the scope of the

EU Emission Trading Scheme, it is expected

that the cost of EU-originated fertilizers will in-

crease significantly in the following years.

Kernel’s process of supply chain management

consists of four stages:

• Setting E&S standards. Our expectations

of suppliers’ environmental and social per-

formance are defined by relevant provisions

of the Code of interaction with suppliers and

the Anti-corruption Clause, which reflect

Kernel’s commitments to the principles of

the UN Global Compact and Sustainable

Development Goals. They include require-

ments on ethics, fair business practices, hu-

man rights, occupational health and safety,

and environmental protection.

• Ensuring obligatory E&S compliance.

Before entering business relationships, all

counterparties are obligated to sign Ker-

nel’s Anti-corruption clause of a contract.

Kernel is entitled to verify compliance with

relevant provisions and terminate contracts

if non-compliance is identified.

• Compliance verification. The procedure

for confirming suppliers’ compliance with

Kernel’s E&S requirements consists of two

levels. First, all potential counterparties un-

dergo initial screening by the corporate

Economic Security Service. Environmental

and social criteria are included in the scope

of initial screening, focusing on the analysis

of the location and nature of suppliers’ op-

erations, certification by relevant E&S

standards, such as ISCC, ISO14001, and

ISO18001, as well as the outcomes of envi-

ronmental inspections, etc. The second

level of verification is an audit that involves

visits to suppliers.

• Production facilities, interviews with

management and personnel, and review

of relevant documentation. In the process

of verification, we provide feedback to sup-

pliers regarding possible ways to improve

their E&S performance, if required.

• Application of business consequences.

Based on the results of audits, Kernel either

continues cooperation with counterparties

or suggests corrective measures if non-

compliance with our E&S requirements is

identified and monitors their implementa-

tion. Another possible consequence of sup-

pliers’ non-observance is the termination of

business relationships.

Onsite contractors also undergo compliance

checks for anti-corruption risks, OHS, and en-

vironmental performance at the stage of ten-

dering. According to the template provisions in

Kernel’s counterparty contracts, onsite con-

tractors are obligated to complete OHS drills

before entering the company’s facilities; pre-

pare the OHS management plans, which need

to be approved by Kernel; report on waste

management procedures, etc.

Our overall approach to managing OHS of on-

site contractors is implemented in line with the

ISO 45001:2018 standard.

Product quality and customer safety

Our management approach to product

quality and customer safety

Kernel's FY2024 performance in product qual-

ity demonstrates our unwavering commitment

to safety, compliance, and excellence in agri-

cultural production. Our adherence to rigorous

certification standards and proactive manage-

ment of health and safety impacts ensure that

our products meet the highest standards of

quality. By maintaining and improving these

practices, Kernel continues to set the bench-

mark in the industry, contributing to sustaina-

ble and safe agricultural production.

Our management approach towards ensuring

the highest quality of our goods is embodied

in Kernel’s Product Quality and Safety Man-

agement policy. The policy is aimed at estab-

lishing a unified system of managing issues

related to product quality and safety and cre-

ating conditions for its continuous develop-

ment in line with international standards (ISO,

GMP+, ISCC, IFS, BSCI, etc.) and Sustaina-

ble Development Goals. At the center of our

approach is the preventive food management

system, which seeks to mitigate potential risks

of biological, chemical, and physical hazards

before they become material.

We adhere to the highest standard of quality

in both the final goods and production pro-

cesses throughout the whole value chain. Our

oil-extraction plants are certified with ISO

9001 “Quality management system” and ISO

22000 “Food safety management” standards,

which integrate the principles of the Hazard

Analysis and Critical Control Point (HACCP)

system and application of procedures devel-

oped by the Codex Alimentarius Commission.

The ISO 9001 standard also covers our export

terminal. In addition, most of our assets are

certified with ISO 14001 “Environmental man-

agement” and ISO 45001 “Occupational

health and safety”, namely key trading com-

pany Kernel-Trade, six oil extraction plants,

two farming clusters, fifteen silos, and one

transshipment terminal.

Our approach and the overall system of food

safety and quality are managed by an internal

quality management team. Besides, they un-

dergo regular inspection and verification by in-

dependent third-party auditors. The scope of

the audit covers production, storage, distribu-

tion, and supply processes; 100% of signifi-

cant products are assessed regarding the im-

provement of health and safety impacts. In

FY2024, a total of

112 independent audits were successfully

passed, which were performed throughout

259

days.

The number of days spent on audit in FY2024

increased by 83 days compared to the previ-

ous year because verification under the new

ISCC certificates requires screening of the

supply chain.

There were no instances of incompliance with

regulations or voluntary codes, which would

have resulted in fines, penalties, or warnings.

Quality of sunflower oil

Kernel’s oil-crushing and bottling processes in

Poltava are certified under the BSCI standard

(grade A), reflecting our commitment to social

responsibility as an employer and maintaining

high standards of social performance. Our la-

boratory is also certified (ISO 17025 “General

requirements for the competence of testing

……………………………………………………………………..

Volumes of purchased grains and oilseeds

by types of suppliers in FY2024

70%

30%

Existing New

5,534

thousand tones

58%

15%

27%

Farmers 1st intermediary 2nd intermediary

5,534

thousand tones

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Social capital continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

and calibration laboratories”), and conducts

regular sample analysis of sunflower oil, meal,

and grain to confirm their compliance with

quality standards. Our TransBulkTerminal is

certified for conducting fumigation activities in

accordance with Gafta standards.

Furthermore, our production assets are com-

pliant with Kosher, Kosher Passover, Badatz,

and Badatz Passover requirements of Jewish

dietary regulations, as well as the Muslim

Halal food standards. Four of our plants are

registered by the U.S. Food and Drug Admin-

istration (FDA), making our sunflower oil, in-

cluding high oleic sunflower oil, in bottles and

flexi-tanks suitable for the USA market. In ad-

dition, Poltava OEP is certified in accordance

with IFS, which allows us to sell bottled sun-

flower oil and sunflower oil in flexitanks to Eu-

ropean countries. Additionally, one of our

plants obtained a country-specific license to

sell sunflower oil to South Korea. We supply

bottled sunflower oil to reputable international

retail chains (Metro, Walmart, Maxima, etc.).

Five of our oil extraction plants, as well as our

trading entities, are certified in line with ISCC

EU standards, which makes the production of

sunflower oil and meal compliant with the legal

sustainability requirements of the EU Renew-

able Energy Directive (RED II) and Fuel Qual-

ity Directive.

Quality of meals

Our whole value chain of protein meal is certi-

fied with the applicable feed quality and safety

standard, namely GMP. All our oilseed pro-

cessing plants are certified with GMP+B1; our

export terminals, as well as trading entities,

Kernel-Trade and Inerco, are certified with

GMP+B3, ensuring feed safety in the collec-

tion, storage, transshipment, and trade of

meals. Finally, our Switzerland-based trading

entity, Inerco, is also compliant with GMP+B4,

which demonstrates feed safety in transporta-

tion and affreightment.

In addition, three of our oil extraction plants,

as well as two trading entities, Kernel-Trade

and Inerco, are certified in line with ISCC

PLUS, with regards to meal production. Our

sunflower meal is also suitable for export to

China as it complies with country-specific reg-

ulations.

Quality of crop production and storage

Within the whole landbank of Kernel, 363

thousand hectares are certified with ISCC EU

requirements, which ensures that crop pro-

duction is performed in environmentally and

socially sound ways. Under this certification

produced crops are considered compliant with

biofuel supply chain sustainability require-

ments outlined in the EU RED II. At all our

grain silos we build our food safety manage-

ment system on the HACCP principles (Haz-

ard Analysis Critical Control Point), namely:

(1) conduct a hazard analysis, (2) determine

critical control points (CCPs), (3) establish crit-

ical limits, (4) establish monitoring proce-

dures, (5) establish corrective actions, (6) es-

tablish verification procedures, and (7) estab-

lish record-keeping and documentation proce-

dures.

Implementation of these principles aims to

prevent and reduce the occurrence of food

safety risks through analysis and control of bi-

ological, chemical, and physical hazards

throughout the production chain.

………………………………………………………………………………………………………………………………………………..…

Matrix of Kernel’s product quality certification

Standard

Oilseed processing plants

Terminals

Trading

Farming

Total

Bandurka

Kropyvnytskyi

Poltava

BSI

Prydniprovksyi

Starokostiantyniv

TransBulkTerminal

TransGrainTerminal

OilEx

portTerminal

Kernel

-Trade

Inerco

ISO 9001

✓

ISO 22000

✓

GMP+R 1.0

✓

ICS

✓

Kosher

✓

Kosher Passover

✓

Badatz Passover

✓

Halal

✓

FDA registration

✓

ISCC EU

✓

ISCC PLUS

✓

BRCGS

✓

IFS

✓

Gafta

✓

China (meal sunflower)

✓

China (oil sunflower)

✓

China (meal rapeseed)

✓

China (oil rapeseed)

✓

ISO 14001

✓

ISO 45001

✓

Total

✓

certificates obtained in FY2024

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

About the report

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

About the report

Disclosure of non-financial information as part

of Kernel’s Annual report is one of the key

channels of communicating our performance

to stakeholders in terms of sustainable devel-

opment and climate actions, as well as our

progress on creating long-term business value

by integrating ESG principles in our opera-

tions.

This report is prepared in line with the Global

Reporting Initiative (GRI) standard, Core op-

tion. When identifying the content of the report

we also ensure compliance with relevant reg-

ulations, including the Luxembourg Law of 23

July 2016 on disclosure of non-financial and

diversity information (the “Law of 23 July

2016”), implementing the European Directive

2014/95/EU.

Stakeholder engagement

Kernel identifies a total of 12 groups of stake-

holders that are subject to inter-influence and

ongoing interaction with the company. These

influences and stakeholders’ categorization

are identified in Kernel’s management vision,

as well as an analysis of the dynamics in

stakeholders’ feedback and media screening.

The company’s management regularly re-

views the list of stakeholder groups.

Our approaches towards interactions with

stakeholders are governed by the Stakeholder

Engagement Policy aligned with relevant IFC

Performance Standards.

Material topics and report content

Evaluation of topics’ materiality and content of

the ‘Sustainability’ section of this report is

based on the results of the stakeholder en-

gagement process, throughout which we iden-

tified interests and expectations of key stake-

holder groups, namely capital providers

(shareholder and debt providers), regulatory

authorities, employees, and environmen-

tal/social NGOs. This was complemented by

the management’s assessment of priorities

and the importance of different aspects of the

company’s sustainability, or ESG, agenda.

The materiality of such topics has been as-

sessed against two criteria: (1) influence on

stakeholder assessments and decisions; and

(2) significance of economic, environmental,

and social impacts. The topics with the highest

combination of scores for both criteria were

defined as material. Furthermore, Kernel’s ex-

ecutive management approved the list of top-

ics that are subject to disclosure in the ‘Sus-

tainability’ section of the report. Boundaries for

material topics include Kernel subsidiaries

where the company has operating control un-

less stated otherwise. All identified topics are

considered material both internally and exter-

nally. The content of this section of the report

also reflects our Communication on Progress

in implementing principles of the UN Global

Compact, namely:

• Human rights and Labor (chapter ‘Human

capital’);

• Environment (chapter ‘Environmental cap-

ital’);

• Anti-corruption (chapter ‘Social capital’).

………………………………………………………………………………………………………………………………………….………

Methods of engagement with key stakeholder groups

Stakeholder

groups

Engagement method

Employees

Learning and development programs

Internal communications

Corporate social media and the company’s website

Corporate hotline for submitting compliance related inquiries

HR Conference and Strategic sessions for each business division

Shareholders,

creditors,

bondholders

Annual reports, three quarterly reports; Annual General Meetings

Corporate social media and the company’s website

Online/offline one-to-one meetings

Online communication via email and investors’ questionnaires

Roadshows and site visits; Investment conferences

Local

communities

Environmental and social impact assessments

Online/offline one-to-one meetings

Dedicated channels of corporate social media and the company’s website

Hot line for submitting compliance related inquiries

Printed material distributed among communities

National and lo-

cal government

Online/offline one-to-one meetings

Corporate social media, the company’s website and the website of the chari-

table foundation “Together with Kernel”

Local and national media

Corporate hotline for submitting compliance related inquiries

Civil society or-

ganiza-

tions/NGOs

Online/offline one-to-one meetings

Corporate social media and the company’s website; Annual reports

Corporate hotline for submitting compliance related inquiries

Local and na-

tional media

Corporate social media and the company’s website

Online/offline one-to-one meetings

Email communications

Customers

Corporate social media; website of Company and company’s brand names

Brand exhibitions and specialized events; annual reports

Corporate hotline for submitting compliance related inquiries

Costumer research and brand health tracking

Partners

(Open Agribusi-

ness)

Online/offline one-to-one meetings

Online communication via email

Brand exhibitions and specialized events

Suppliers

Supply Chain Sustainability Program

Online/offline one-to-one meetings Corporate social media and the com-

pany’s website

Certification

bodies

Online/offline one-to-one meetings; site visits

Disclosure/application requirements for certification bodies

………………………………………………………………………………………………………………………………………….………..

Matrix of Kernel’s material ESG topics

Category of impact

Material topic

Topic boundary

Social capital

Economic performance and impact

All business segments

Anti-corruption and compliance

All business segments

Support of local communities and society as a whole

All business segments

Product quality and customer safety

All business segments

Interactions with suppliers

All business segments

Environmental capital

Energy management

All business segments

Water and effluents management

All business segments

Waste management

All business segments

Biodiversity management

Farming

Climate actions

All business segments

Monitoring of environmental impacts and ecological compli-

ance

All business segments

Human capital

Employment

All business segments

Training and career advancement

All business segments

Human rights, diversity, and inclusion

All business segments

Freedom of associations and collective bargaining

All business segments

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

GRI Content Index

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Material topic

Disclosure

number

Disclosure title References and comments

GRI 102: General Dis-

closures 2016. Or-

ganizational profile

102-1

Name of the organization

Kernel Holding S.A.

102-2 Activities, brands, products, and services

Our business model (p.6), Kernel’s corporate web-

site

102-3

Location of headquarters

Kyiv, Ukraine

102-4

Location of operations

Key Kernel’s assets located in Ukraine (p. 7)

102-5 Ownership and legal form

Group structure (p.97), Share capital and signifi-

cant shareholders (p.98)

102-6 Markets served

Geographic locations: sunflower oil sold in bulk

(p.14) bottled sunflower oil (p.14), grain export mar-

kets (p.14)

Sectors served: food and agriculture.

Types of customers and beneficiaries: global soft

commodity traders and processors of agricultural

commodities, feed compounders, retail chains, and

distributors

102-7 Scale of the organization

Total number of employees: (p.55)

Total number of operations: three business seg-

ments: Oilseed Processing, Infrastructure and

Trading, and Farming (p.6, 7, 105).

Net revenues: key highlights (p.2)

Total capitalization: market capitalization (for up-

dated figures please see Kernel profile on Warsaw

Stock Exchange website); credit metrics (p.10)

Quantity of products or services provided: Kernel a

Glance (p. 7)

102-8 Information on employees and other workers

General employment information (p.55)

Workers who are not employees perform an insig-

nificant portion of activities. Significant variations in

the numbers include only seasonal variations of

employees in the Kernel farming business, which

does not exceed 6% of the total headcount. Data

compiled by Kernel employee accounting system;

General employment information

102-9 Supply chain

Our Business Model (p.6), Interactions with suppli-

ers (p.64)

Types of suppliers: independent farmers-suppliers

of grain and oilseeds, suppliers of inputs to crop

production (seeds, fertilizers, crop protection

agents, fuel), suppliers of other inputs (natural gas,

energy)

102-10

Significant changes to the organization and its

supply chain

There were no significant changes to the Kernel

supply chain in FY2024.

102-11 Precautionary Principle or approach

The Group’s entities apply the Precautionary Prin-

ciple through maintaining compliance with the Law

of Ukraine on Environmental Impact Assessment

(p.47). The law requires a promoter to provide sci-

entific evidence of no threats of serious or irreversi-

ble environmental damage associated with the

planned development and activities. Unless such

evidence is presented, no statutory authorization

can be granted to the development and activities in

question.

The same principle works for environmental permit-

ting. No emission or water use permit can be

granted unless an applicant presents evidence of

impacts staying below established thresholds (en-

vironmental quality standards). Kernel’s subsidiar-

ies hold all applicable environmental permits (p.47)

102-12 External initiatives

Kernel endorses the following externally-developed

economic, environmental, and social charters,

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

GRI Content Index continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Material topic

Disclosure

number

Disclosure title References and comments

principles, and other initiatives:

International Labour Organization's Fundamental

Principles and Rights at Work;

United Nations Global Compact (UNGC);

United Nations Universal Declaration of Human

Rights;

Carbon Disclosure Project (CDP);

Task Force on Climate-Related Financial Disclo-

sures (TCFD);

Global Reporting Initiative (GRI).

102-13 Membership of associations

Kernel, through its subsidiaries, is a member of

several industry associations in Ukraine, including:

European Business Association

(incl. Logistics

Committee);

American Chamber of Commerce;

Ukrainian Grain Association;

Ukrainian Agrarian Association;

U.S.-Ukraine Business Council;

Federation of Oils, Seeds, and Fats Associations;

Grain and Feed Trade Association;

UkrOliyaProm;

Ukrainian Network of Integrity and Compliance;

UN Global Compact

Association “Ukrainian Agribusiness Club” (UCAB)

Bioenergy Association of Ukraine

GRI 102: General Dis-

closures 2016. Strat-

egy

102-14 Statement from senior decision-maker Chairman’s statement (p.3)

GRI 102: General Dis-

closures 2016. Ethics

and integrity

102-16

Values, principles, standards, and norms of

behavior

Business ethics and compliance section on Ker-

nel’s corporate website

Sustainability section on Kernel’s corporate web-

site

102-17

Mechanisms for advice and concerns about

ethics

Anti-corruption and compliance (p.62)

GRI 102: General Dis-

closures 2016. Gov-

ernance

102-18 Governance structure

The governance structure of the organization

(p.73)

In FY2022 the Company established a Sustainabil-

ity committee at the Board of Directors, responsible

for overseeing the development of the ESG and cli-

mate corporate governance agenda.

GRI 102: General Dis-

closures 2016. Stake-

holder engagement

102-40

List of stakeholder groups

Stakeholder engagement (p.67)

102-41 Collective bargaining agreements

Freedom of association and collective bargaining

(p. 61)

102-42

Identifying and selecting stakeholders

Stakeholder engagement (p.67)

102-43

Approach to stakeholder engagement

Stakeholder engagement (p.67)

102-44

Key topics and concerns raised

Stakeholder engagement (p.67)

GRI 102: General Dis-

closures 2016. Re-

porting practice

102-45

Entities included in the consolidated financial

statements

Notes 1 to the Consolidated Financial Statements

(p. 97)

102-46

Defining report content and topic Boundaries

Material topics and report content (p.67)

102-47

List of material topics

Material topics and report content (p.67)

102-48 Restatements of information

No restatements of information took place in

FY2024

102-49 Changes in reporting

There were no changes in the list of material topics

and topic boundaries

102-50 Reporting period

The financial year 2024 ended on 30 June 2024.

See also Note 1 to the Consolidated Financial

Statements

102-51 Date of most recent report

27 October 2023 is the date of the most recent pre-

vious report, as a sustainability section of the

FY2023 annual report

102-52

Reporting cycle

Annual

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

GRI Content Index continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Material topic

Disclosure

number

Disclosure title References and comments

102-53

Contact point for questions regarding the re-

port

sustainability@kernel.ua; ir@kernel.ua

102-54

Claims of reporting in accordance with the GRI

Standards

This report has been prepared in accordance with

the GRI Standards:

Core option

102-55 GRI content index

p.68-72

102-56 External assurance

The Company does not have a policy regarding ex-

ternal assurance. The FY2024 Sustainability report

was not externally assured.

GRI 201: Economic

Performance 2016

GRI 103: Management Approach 2016

Economic performance and impact (p. 63)

Material topics and report content (p.67)

About the Report (p.67)

201-1

Direct economic value generated and distrib-

uted

Economic performance and impact (p. 63)

201-2

Financial implications and other risks and op-

portunities due to climate change

Approach to climate risk identification and manage-

ment (p.48)

Material climate-related risks (p.49)

201-4

Financial assistance received from the gov-

ernment

Economic performance and impact (p. 63)

GRI 203: Indirect

Economic

Impacts 2016

GRI 103: Management Approach 2016

Support of local communities and society as a

whole (p.63)

About the Report (p.67)

203-1

Infrastructure investments and services sup-

ported

Social projects and charity spending (p.64)

203-2 Significant indirect economic impact

Support of local communities and society as a

whole (p.63)

GRI 205: Anti-corrup-

tion 2016

GRI 103: Management Approach 2016

Anti-corruption and compliance (p.62)

About the Report (p.67)

205-1

Operations assessed for risks related to cor-

ruption

Anti-corruption and compliance (p.62)

205-2

Communication and training about anti-cor-

ruption policies and procedures

Anti-corruption and compliance (p.62). We do not

provide a breakdown of communication and train-

ing by region, as all such activities happen in

Ukraine

205-3

Confirmed incidents of corruption and actions

taken

Anti-corruption and compliance (p.62)

GRI 302: Energy 2016

GRI 103: Management Approach 2016

Energy management (p.41)

About the Report (p.67)

302-1

Energy consumption within the organization

Energy management (p.41)

302-3

Energy intensity

Energy management (p.41)

GRI 303: Water and

Effluents 2018

GRI 103: Management Approach 2016

Water and effluents management (p. 42)

About the Report (p.67)

303-1 Interactions with water as a shared resource

Water and effluents management (p. 42), Environ-

mental Protection Policy

303-2

Management of water discharge-related im-

pacts

Water and effluents management (p. 42)

303-3

Water withdrawal

Water and effluents management (p. 42)

303-4

Water discharge

Water and effluents management (p. 42)

GRI 304: Biodiversity

2016

GRI 103: Management Approach 2016

Biodiversity management (p.45)

About the Report (p.67)

304-1

Operational sites owned, leased, managed in,

or adjacent to, protected areas and areas

Biodiversity management (p.45)

Reason for omission - Confidentiality constraints.

We omit disclosure of details of each separate site

falling within the territory of a national park, as all

such sites are lands, we lease from third parties,

and a detailed list of such sites constitutes commer-

cial information, as we compete for leasing land

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

GRI Content Index continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Material topic

Disclosure

number

Disclosure title References and comments

with other players in Ukraine.

GRI 305: Emissions

2016

GRI 103: Management Approach 2016

Climate actions (TCFD disclosure) (p.48)

About the Report (p.67)

305-1 Direct (Scope 1) GHG emissions

Kernel’s Scope 1, Scope 2, Scope 3 greenhouse

gas emissions and other air emissions (p.51)

305-2 Energy indirect (Scope 2) GHG emissions

Kernel’s Scope 1, Scope 2, Scope 3 greenhouse

gas emissions and other air emissions (p.51)

305-3 Other indirect (Scope 3) GHG emissions

Kernel’s Scope 1, Scope 2, Scope 3 greenhouse

gas emissions and other air emissions (p.51)

305-4 GHG emissions intensity

Kernel’s Scope 1, Scope 2, Scope 3 greenhouse

gas emissions and other air emissions (p.51)

305-7

Nitrogen oxides (NOX), sulfur oxides (SOX), and other significant air emissions

GRI 306: Waste 2020

GRI 103: Management Approach 2016

Waste management (p.43)

About the Report (p.67)

306-1

Waste generation and significant waste-re-

lated impacts

Waste management (p.43)

306-2

Management of significant waste-related im-

pacts

Waste management (p.43)

306-3

Waste generated

Waste management (p.43)

GRI 307: Environ-

mental compliance

GRI 103: Management Approach 2016

Monitoring of environmental impact and ecological

compliance (p.47)

About the Report (p.67)

307-1

Non-compliance with environmental laws and

regulations

Monitoring of environmental impact and ecological

compliance (p.47)

GRI 308: Supplier En-

vironmental

Assessment 2016

GRI 103: Management Approach 2016

Interaction with suppliers (p.64)

About the Report (p.67)

308-2

Negative environmental impacts in the supply

chain and actions taken

Interaction with suppliers (p. 64)

GRI 401: Employ-

ment 2016

GRI 103: Management Approach 2016

General employment information (p.55)

About the Report (p.67)

401-1

New employee hires and employee turnover

General employment information (p.55)

401-2

Benefits provided to full-time employees that

are not provided to temporary or part-time em-

ployees

Remuneration approach and benefits (p.55)

401-3

Parental leave

General employment information (p.55)

GRI 403: Occupa-

tional Health and

Safety 2018

GRI 103: Management Approach 2016

Occupational health and safety (p.58)

About the Report (p.67)

403-1

Occupational health and safety management

system

Occupational health and safety (p.58)

403-2

Hazard identification, risk assessment, and in-

cident investigation

Occupational health and safety (p.58)

403-3

Occupational health services

Occupational health and safety (p.58)

403-4

Worker participation, consultation, and com-

munication on occupational health and safety

Occupational health and safety (p.58). The Com-

pany does not have a formal joint management–

worker health and safety committee.

403-5

Worker training on occupational health and

safety

Occupational health and safety (p.58)

403-6 Promotion of worker health

Occupational health and safety (p.58), Remunera-

tion approach and benefits (p.55)

403-7

Prevention and mitigation of occupational

health and safety impacts directly linked by

business relationships

Occupational health and safety (p.58)

403-8

Workers covered by an occupational health

and safety management system

Occupational health and safety (p.58). No workers

have been excluded from this disclosure. OHSMS

covers all Group’s entities and, respectively, all

Group workers.

403-9 Work-related injuries

Occupational health and safety (p.58). The main

types of work-related injuries include slips, trips,

and falls. No workers have been excluded from

this disclosure.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

GRI Content Index continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Material topic

Disclosure

number

Disclosure title References and comments

GRI 404: Training

and Education 2016

GRI 103: Management Approach 2016

Training and career advancement (p.57)

About the Report (p.67)

404-1

Average hours of training per year per em-

ployee

Training and career advancement (p.57)

404-2

Programs for upgrading employee skills and

transition assistance programs

Training and career advancement (p.57).

We do not provide any specific transition assis-

tance programs to facilitate the management of ca-

reer endings resulting from retirement or termina-

tion of employment, apart from one-off severance

payment or retirement benefits.

404-3

Percentage of employees receiving regular

performance and career development reviews

Training and career advancement (p.57)

GRI 405: Diversity

and Equal

Opportunity 2016

GRI 103: Management Approach 2016

Human rights, diversity and inclusion (p.60)

About the Report (p.67)

405-1

Diversity of governance bodies and employ-

ees

Human rights, diversity and inclusion (p.60)

GRI 407: Freedom of

Association and

Collective Bargaining

2016

GRI 103: Management Approach 2016

Freedom of association and collective bargaining

(p. 61)

About the Report (p.67)

407-1

Operations and suppliers in which the right to

freedom of association and collective bargain-

ing may be at risk

Freedom of association and collective bargaining

(p. 61).

We have no operations in which workers’ rights to

exercise freedom of association may be violated or

at significant risk. We have not identified suppliers

in which workers’ rights to exercise freedom of as-

sociation or collective bargaining may be violated.

GRI 412: Human

Rights Assessment

2016

GRI 103: Management Approach 2016

Human rights, diversity and inclusion (p.60)

About the Report (p.67)

412-2

Employee training on human rights policies or

procedures

Human rights, diversity and inclusion (p.60)

GRI 413: Local Com-

munities 2016

GRI 103: Management Approach 2016

Support of local communities and society as a

whole (p.63)

413-1

Operations with local community engagement,

impact assessments, and development pro-

grams

Support of local communities and society as a

whole (p.63)

100% of operations in our Farming segment are in-

volved in local community engagement, impact as-

sessments, and/or development programs

413-2

Operations with significant actual and potential

negative impacts on local communities

Kernel is not aware of any significant negative im-

pacts on local communities as a result of its activi-

ties.

GRI 414: Supplier So-

cial Assessment

2016

GRI 103: Management Approach 2016

Interaction with suppliers (p. 64)

About the Report (p.67)

414-2

Negative social impacts in the supply chain

and actions taken

Interaction with suppliers (p. 64)

GRI 416: Customer

Health and Safety

2016

GRI 103: Management Approach 2016

Product quality and customer safety (p.65)

About the Report (p.67)

416-1

Assessment of the health and safety impacts

of product and service categories

Product quality and customer safety (p.65)

We assess health and safety impacts for improve-

ment for all our significant products.

416-2

Incidents of non-compliance concerning the

health and safety impacts of products and ser-

vices

Product quality and customer safety (p.65)

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Corporate Governance

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Main characteristics of Kernel

Group structure

Kernel Holding S.A. (the “Company”) is a Lux-

embourg-based public limited liability com-

pany (RCS Luxembourg B109173) estab-

lished on June 15, 2005, with its registered of-

fice at 9 Rue de Bitbourg, L-1273 Luxem-

bourg. It serves as the holding entity for a

group of companies, collectively referred to as

the “Group” or “Kernel”.

The list of primary subsidiaries is disclosed on

page 97 of this report.

Listing on the WSE

The Company's shares have been listed on

the main market of the Warsaw Stock Ex-

change (the “WSE”) since November 2007.

On 13 April 2023, the Board of Directors de-

cided to delist the Company from the WSE,

and on 12 May 2023, the Company applied to

the Polish Financial Supervision Authority

(“PFSA”) for approval.

On 13 October 2023, the group of minority

shareholders of the Company initiated legal

proceedings to cancel the Board’s delisting

decision. Given that, in March 2024, the PFSA

informed the Company about the suspension

of the administrative proceedings on the

delisting of the Company from the Warsaw

Stock Exchange. The PFSA will not issue the

decision on granting permission to withdraw

the Company's shares from trading on the reg-

ulated market until the District Court in Luxem-

bourg has resolved the allegations raised by

minority shareholders. Consequently, the pro-

cess of the Kernel’s delisting from the WSE

was ongoing as of 30 June 2024.

Share capital and significant share-

holdings

The issued capital of the Company as of 30

June 2024 consisted of 293,429,230 fully paid

ordinary single-class shares without indication

of the nominal value. Ordinary shares have

equal voting rights and rights to receive divi-

dends.

According to notifications received by the

Company, one shareholder owned more than

5% of the Company’s voting shares as of 30

June 2024:

• Namsen Limited (hereinafter “Namsen"), a

legal entity directly controlled by the

Chairman of the Board of Directors and

founder of the business, Mr. Andrii Ver-

evskyi, owns 94.4% of voting shares.

The Company is unaware of other sharehold-

ers except Namsen who hold more than 5% of

the share capital and total votes.

On 1 September 2023, the Company issued

216,000,000 new shares in the registered

form (see details in the section “Share capital

increase on 1 September 2023”).

Since February 2022, the Company held

6,602,000 shares as treasury stock, the Com-

pany’s wholly-owned subsidiary, Etrecom In-

vestments Limited following a series of share

buybacks conducted in FY2022. On 21 March

2024, the Extraordinary General Meeting of

shareholders approved the cancellation of

these treasury shares. As a result, the total

number of shares outstanding reduced from

300,031,230 to 293,429,230, and the Com-

pany held no treasury shares as of 30 June

………………………………………………………………………

Ownership structure as of 30 June 2024

owned

%-age

owned

Namsen Limited

276,914,889

94.4%

Other

16,514,341

5.6%

Total

293,429,230

100.0%

………………………………………………………………………………………………………………………………………...................

Governance structure

General meeting of shareholders

Board of Directors

Executive Management Team

Nomination and

Remuneration Committee

Sustainability Committee

Audit Committee

………………………………………………………………………………………………………………………………………………….

Share capital increase on 1 September 2023

Following the request of the Board to have an emergency financing option in case the circum-

stances in Ukraine require it, the extraordinary general meeting of shareholders held on 23

September 2022 created the authorized share capital and granted authorization to the Board to

issue new shares on such terms as the Board sees fit.

In the summer of 2023, while negotiating the third restructuring of the Group’s loan portfolio

during wartime in Ukraine, the Group’s creditors demanded equity support from the Company’s

shareholders in order to proceed with the restructuring of the loan portfolio. Following several

rounds of negotiations, the Group managed to reduce the amount of the demanded equity con-

tribution and agreed to initiate the equity raise of USD 60 million. On 22 August 2023, the Com-

pany announced the share offering to qualified investors – existing shareholders of the Com-

pany. As a part of the book-

building process, shareholders provided their subscription forms

which altogether determined (via the mechanism of a Dutch auction) the number of shares to

be issued and the issue price in such a way that the Company raised the necessary amount of

USD 60 million and completed the requirement of the creditors. Consequently, the Company

allotted 216,000,000 shares to several qualified investors (shareholders of the Company) at the

issue price of USD 0.2777 per share.

On 1 September 2023, the Board approved the results of the offering and the share capital

increase. These shares, all paid up in cash, were issued in the registered form and they will not

be admitted to trading on any securities exchange, given the Company’s pending delisting pro-

cess. Each share offers its holder a single voting right at the Company's general meeting of

shareholders. Additionally, each of these shares carries dividend rights congruent with the ex-

isting shares, except for the 6,602,000 shares owned by the Company’s subsidiary Etrecom

Investments Limited which does not have voting or dividend rights.

As a result of the share capital increase, the number of Company’s shares issued increased to

300,031,230 shares. These shares collectively represent 293,429,230 voting rights for the Com-

pany's General Meeting, factoring in the 6,602,000 shares held by Etrecom Investments Lim-

ited, which are devoid of voting rights due to their treasury share nature. The stake of Namsen

Limited increased to 91.61% of total shares issued, or 93.67% of shares with voting/dividend

rights.

A group of minority shareholders holding 0.4% of Company’s shares (same group opposing the

delisting of the Company and other corporate actions) initiated legal actions against the Com-

pany aimed at suspension and, subsequently, annulment of the share offering and share capital

increase. The respective litigations are currently pending.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Corporate Governance continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

2024.

As of 30 June 2024, there were no outstanding

options granting rights to acquire shares of the

Company to which the Company is a party.

Corporate governance framework

Kernel is committed to high standards of cor-

porate governance and is guided by the cor-

porate governance framework determined by:

• the corporate law of the Grand Duchy of

Luxembourg as a place of incorporation (in-

cluding voluntary compliance with most of

the provisions of the X Principles of Corpo-

rate Governance of the Luxembourg Stock

Exchange); and

• the corporate governance rules set out in

the Best Practice for WSE Listed Compa-

nies 2021 as a place of Company’s shares

listing. Paragraph 29 of the Warsaw Stock

Exchange Rules requires issuers to publish

a report indicating which rules the issuer

complies with and which rules the issuer

does not comply with permanently. The

Company published such a report on 12 Au-

gust 2021, available on the Company’s

website. The Company applied all the prin-

ciples except for detailed principles 1.4.,

1.4.1., 1.4.2., 1.5., 2.1., 2.11.3., 2.11.5.,

2.11.6., 3.6., 3.9., 6.2., 6.3., 6.4.

The key documents defining the Company’s

corporate governance principles include the

Articles of Association and the Corporate Gov-

ernance Charter. Additionally, Kernel has a

Remuneration Policy, which is approved and

periodically reviewed by the general meeting

of shareholders and applies to both the Board

of Directors and the Executive Management

Team. All these documents can be accessed

on the Company’s website.

Following a regular review of the Company’s

adherence to best corporate governance prac-

tices, the Board believes that the Company

has made its best efforts to comply with:

• the applicable corporate governance princi-

ples;

• disclosure obligations concerning compli-

ance with corporate governance principles

defined in the WSE Rules;

• regulations on current and periodic reports

published by the Company as a securities

issuer, according to WSE Rules.

General Meeting of Sharehold-

ers

The General Meeting of Shareholders is the

Company's highest governance body, pos-

sessing the broadest power to order, carry out,

or ratify all acts relating to the Company's op-

erations. Detailed information regarding the

organization and functioning of the General

Meeting of Shareholders can be found in the

Articles of Association and the Corporate

Governance Charter, both of which are avail-

able on the Company’s website.

The annual general meeting held on 11 De-

cember 2023 (the “AGM 2023):

• approved the management report of the

Board of Directors, the consolidated finan-

cial statements of the Group, and

standalone annual accounts of the Com-

pany, along with the report of the independ-

ent auditor for the year ended 30 June

2023;

• granted discharge to the directors of the

Company for their mandates in FY2023;

• acknowledged the resignation of Mrs.

Viktoriia Lukianenko as an executive direc-

tor of the Company, effective 12 December

2023, and granted her discharge for the ex-

ercise of her mandate;

• appointed Mr. Sergiy Volkov as an execu-

tive director of the Company;

• renewed the mandates of all directors and

approved the fees for executive and non-ex-

ecutive directors for the year ended 10 De-

cember 2024;

• re-appointed PwC as the independent audi-

tor of the Company;

• amended the management incentive plan

adopted by the extraordinary general meet-

ing of shareholders held on 30 August 2021

and amended the remuneration policy.

The extraordinary general meeting of

shareholders held on 21 March 2024 ap-

proved the reduction of the Company’s share

capital by USD 174,332.41 through the can-

cellation of 6,602,000 shares held by Etrecom

Investments Limited, a wholly-owned subsidi-

ary of the Company, and the subsequent

amendment of Article 5 of the Company’s Ar-

ticles of Association.

As shareholders representing approximately

0.4% of the Company’s share capital initiated

legal actions to, among other things, suspend

the effects of the minutes of the AGM 2023

and annul the decisions taken, there was a po-

tential risk that the previous votes might be in-

validated. Such frivolous litigations might have

had a negative impact on Kernel, including

disruption to the Company’s orderly opera-

tions, potentially complicating reporting and

auditing processes, and/or creating a vacuum

of corporate powers and some stage. As a

precautionary measure, shareholders were in-

vited to vote again on each agenda item. This

was to either maintain the effect of their vote

expressed at the AGM 2023 (if applicable) or

to cast a new vote on each agenda item (if no

vote was expressed at the AGM 2023 or they

wished to change their previous vote).

As a result, the extraordinary general meet-

ing of shareholders held on 12 August

2024 reapproved all the decisions made at the

AGM 2023 held on 11 December 2023.

The next annual general meeting of share-

holders is scheduled for 10 December 2024.

Except for the meeting on 12 August 2024, all

recent general meetings were conducted with-

out the physical presence of shareholders, as

those who chose to attend opted for direct

electronic voting or indirect voting via the inde-

pendent proxy.

All documents related to the general meetings

of shareholders and the resolutions adopted

are available on the Company’s website.

Board of Directors

The Company is managed by the Board of Di-

rectors (the “Board”), which is the ultimate de-

cision-making body, except for powers re-

served for the general meeting of sharehold-

ers as stipulated by law, the Articles of Asso-

ciation, and the Corporate Governance Char-

ter. The Board is vested with the broadest

powers to perform all acts of administration

and disposition in compliance with the Com-

pany’s corporate purpose. The Board resolves

to take its decisions objectively, in the best

corporate interest of the Company. The Board

is collectively responsible and accountable to

the shareholders for the proper conduct of the

business, the long-term success of the Com-

pany, the effectiveness of the reporting sys-

tem, and the corporate governance frame-

work.

The responsibilities of the Board include ap-

proval and review of strategies and policies,

governance of the Company, and manage-

ment supervision. More detailed responsibili-

ties are specified in the Company’s Corporate

Governance Charter.

All Directors are equally accountable for the

proper stewardship of the Company’s affairs.

The non-executive directors have a responsi-

bility to ensure that the business strategies

proposed are fully discussed and critically re-

viewed. This enables the Directors to promote

the success of the Company for the benefit of

its shareholders, while having regard to,

among other matters, the interest of employ-

ees, the fostering of business relationships

with customers, suppliers, and other stake-

holders, as well as promoting the impact of the

Company’s operations on the communities

and the environment in which the business op-

erates.

The Board approves every investment, divest-

ment, acquisition, disposal, and funding trans-

action exceeding in value 5% of the average

12 months trailing daily market capitalization

of the Company.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Corporate Governance continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

………………………………………………………………………………………………………………………………………............................................................................................................................

Effective and experienced leadership

Kernel Holding S.A. is governed by the Board of Directors composing of eight members, including three non

executive directors, two of whom are

independent). Key information on Directors is as follows (with further details available on Company’s

website).

Andrii Verevskyi, 50

Chairman of the Board, Founder

Andrii Miski-

Oglu, 47

Independent non-executive director

Tenure: 17 years

Skills and experience:

Founded the Group’s business in 1995,

holding various executive positions

within the Group. Presently, he over-

sees the strategic development and

overall management of the Group.

Board Committee:

Nomination & Remuneration Commit-

tee

Tenure: 3 years

Skills and experience:

21 years’ experience in public account-

ing and audit in EY, involved in major

EY Global audit-related initiatives. An-

drii is Certified Public Accountant in the

US since 2011 and a member of The

American Institute of Certified Public

Accountants (AICPA).

Board Committee:

Chairman of the

Audit Committee, Nomination & Remu-

neration Committee

Daria Danilczuk, 37

Non-executive director

Mykhaylo Mishov, 42

Independent non-executive director

Tenure: 3 years

Skills and experience:

Agricultural commodity broker, special-

ized in Black Sea commodity markets,

experienced in international trade and

biofuels trade and regulatory frame-

work.

Board Committee:

Chairwoman of the Sustainability Com-

mittee, Audit Committee

Tenure: 3 years

Skills and experience:

Mr. Mishov has over 18 years’ experi-

ence in consulting, including Ernst &

Young, Deloitte and KPMG, leading nu-

merous strategy and performance im-

provement projects for agribusiness cli-

ents.

Board Committee:

Chairman of the Nomination & Remu-

neration Committee, Audit Committee,

Sustainability Committee

Sergiy Volkov, 44

Chief Financial Officer

Yevgen Osypov, 48

Chief Executive Officer

Tenure: 1 year

Skills and experience:

Mr. Volkov is responsible for the overall

financial management of Kernel. He

holds CPA certification.

Board Committee:

None

Tenure: 7 years

Skills and experience:

Mr. Osypov is responsible for the day-

to-day management of the

Company’s

subsidiaries, execution of strategy,

budgets, and Board decisions. He com-

pleted several educational programs in

Harvard Business School.

Board Committee:

Sustainability

Committee

Anastasiia Usachova, 53

Executive Director

Yuriy Kovalchuk, 43

Corporate Investment Director

Tenure: 17 years

Skills and experience:

Mrs. Usachova is responsible for the

overall financial oversight of Kernel.

She holds an MBA degree from IMD

(Switzerland).

Board Committee:

Sustainability Committee

Tenure: 13 years

Skills and experience:

Mr. Kovalchuk contributes to strategy

formulation and is responsible for the

execution of investment projects. Yuriy

has been a Fellow with Association of

Chartered Certified Accountants

(FCCA), since September 2013.

Board Committee: None

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Corporate Governance continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Board composition

The Board is composed of eight directors, five

of which are executive (including a Chairman)

and three are non-executive directors. Two

non-executive directors fulfill the criteria of be-

ing independent. None of the three non-exec-

utive directors have material relations with any

shareholder who holds at least 5% of the total

vote in the company.

Several changes occurred in the Board’s

composition in FY2024:

• At the general meeting on 11 December

2023, the resignation of Mrs. Viktoriia

Lukianenko as Executive Director was ac-

cepted, and she was granted full discharge

for the exercise of her mandate.

• Mr. Sergiy Volkov was appointed as Execu-

tive Director at the same meeting.

Mr. Volkov, who also serves as the Group’s

Chief Financial Officer and a member of the

Executive Management Team (effective since

8 May 2023) brings new expertise to the

Board.

Our non-executive directors are highly experi-

enced and influential, with diverse back-

grounds across various industries and coun-

tries. They bring a strong blend of skills and

business acumen, significantly enhancing the

Board and its Committees' effectiveness.

The Chairman’s mandate expires at the an-

nual general meeting in December 2025, while

the mandates of all other directors expire in

December 2024.

The Nomination & Remuneration Committee

regularly reviews the Board’s composition to

ensure a diverse, balanced mix of competen-

cies, skills, experience, and knowledge of the

Company’s affairs. Key principles for the nom-

ination, appointment, and re-election of Direc-

tors are outlined in the Corporate Governance

Charter, available on Kernel’s website.

Board diversity

Diversity among Directors enhances the

Board's performance and efficiency, serving

the Company’s best interests. The Board's di-

versity is supported by Kernel’s Diversity,

Equality, and Inclusion Policy, adopted by

management in 2018 and approved by the

AGM on 10 December 2021. The policy is con-

sistently applied by the Nomination & Remu-

neration Committee and the Executive Man-

agement Team in employee and management

appointments.

The Company benefits from diversity in:

• gender;

• age and tenure;

• professional experience (industry and op-

erations expertise, soft commodities trad-

ing, finance and audit, banking and invest-

ments, and sustainability);

• nationality and culture (the Board in-

cludes a majority of Ukrainian Directors,

along with one Polish citizen, one U.S. citi-

zen, and one U.S. resident).

Directors consider diversity when evaluating

the Board's effectiveness. In the FY2024 an-

nual self-evaluation, all Directors acknowl-

edged the Board’s sufficient range of exper-

tise, attitudes, and external relationships.

Directors’ independence

Each independent director annually submits a

statement confirming compliance with the in-

dependence criteria outlined in Annex II of the

European Commission Recommendation of

15 February 2005. These statements are pub-

lished on the Company’s website.

According to statements received in 2024, two

of the three non-executive directors met the in-

dependence criteria.

Conflict of interest

A Corporate Governance Charter adopted in

May 2018 emphasized the disclosure of con-

flicts of interest among Directors. Any Director

having a direct or indirect conflict of interest

must inform the Board thereof and shall refrain

from deliberating or voting on the relevant item

of the agenda. Any conflict of interest should

be properly declared and documented.

Members of the Board shall refrain from pro-

fessional or other activities which might cause

a conflict of interest or adversely affect their

reputation as members of the governing bod-

ies of the Company, and where a conflict of

interest arises, immediately disclose it.

The following non-exhaustive list is an exam-

ple of the duties that shall be followed by the

Directors:

• duty not to accept any benefits from third

parties, which may give rise to personal fi-

nancial interest and/or gain;

• duty to disclose any interest in a proposed

transaction or arrangement with the Com-

pany and a separate and independent duty

to disclose any arrangement with the Com-

pany; and

• duty to avoid conflicts of interest unless au-

thorized.

In FY2024, one conflict of interest was de-

clared by Directors: Mr. Yevgen Osypov de-

clared a conflict of interest regarding the

amendment of the management incentive plan

when discussing this matter during the Board

meeting held on 7 November 2023.

As of October 2024, non-executive directors

occupied the following positions in companies

outside Kernel:

• Mrs. Daria Danilczuk is a commodities bro-

ker and trading expert at JDI Brokers, Swit-

zerland.

• Mr. Mykhaylo Mishov is Supply Chain Strat-

egy Lead at SC Johnson, Chicago, United

States.

• Mr. Andrii Miski-Oglu does not occupy posi-

tions in companies outside Kernel at the

date of publication of this report.

Board committees

The Board has established three committees:

• Audit Committee;

• Nomination & Remuneration Committee

(hereinafter “N&R Committee”);

• Sustainability Committee.

This structure ensures efficient performance,

as specific matters are first discussed by spe-

cialized bodies with relevant expertise before

Composition of the Board of Directors as of 27 October 2024

75%

25%

Male

Female

Gender

13%

75%

13%

<40

41-50

>50

Age

50%

13%

38%

<5 years

5-10 years

>10 years

Tenure

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Corporate Governance continued

Management

Report

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Report

Corporate

Governance

Financial

Statements

being presented to the Board.

The Board regularly reviews the need for new

committees to adapt to changing business

needs. Following the annual review in July

2024, it was concluded that no new commit-

tees are needed at this time.

Board self-evaluation

In line with best corporate governance stand-

ards, the Board conducts a formal self-evalu-

ation of its performance, effectiveness, oper-

ating efficiency, composition, organizational

structure, compliance with governance rules,

and relationships with executive management

and stakeholders. The 2024 survey found no

major issues in these areas. The Board recog-

nized the quality and timeliness of information

provided, the effectiveness of its practices and

meetings, appropriate composition, clearly de-

fined roles, and well-established committee

practices.

Independent advice

All directors can consult the corporate secre-

tary for assistance with governance, corporate

administration, and legal matters. Directors

may also seek advice from independent pro-

fessional advisors on governance or business-

related issues pertinent to their duties, at the

Company’s expense.

Board activity report

The Board held twelve meetings in FY2024,

including one in-person meeting in Luxem-

bourg and eleven via teleconference. The av-

erage attendance rate for all directors was

98% during this period.

Typically, at each meeting, the Chairman of

the Board and other executive directors report

on the strategy implementation and recent de-

velopments, along with management ac-

counts. The Board’s work plan (minutes and

circular resolutions) for FY2024 included,

among others, the following items:

• review of the impact of the Russia-Ukraine

war on operations;

• review of the Company’s mid-term strategy

and budget approval;

• review and approval of annual, semi-an-

nual, and quarterly accounts;

• review of operations updates and manage-

ment accounts

• convening annual and extraordinary gen-

eral meetings of shareholders;

• approvals of the share capital increase and

cancellation of treasury shares;

• review of corporate-governance-related

questions;

• oversight of risk management: approval of

top risks for the Company and mitigation

plan, review of reports on top risks

mitigation activities; update on implement-

ing the risk management system; review of

risk limits; review of outstanding legal

cases;

• updates from Audit Committee, N&R Com-

mittee, and Sustainability Committee;

• review of the performance of the Group sus-

tainability function;

• review and approvals of financing and in-

vestment transactions;

• matters related to the delisting of the Com-

pany from the Warsaw Stock Exchange;

• various ad-hoc items and other corporate

decisions.

Executive Management Team

The Executive Management Team is respon-

sible for the overall financial and operating re-

sults of the Company’s subsidiaries, heading

operating segments and providing support

functions on a daily basis. The Executive Man-

agement Team focuses on strategy imple-

mentation, financial and competitive perfor-

mance, commercial and technological devel-

opments, succession planning, and organiza-

tional development.

The Executive Management Team is headed

by the Chief Executive Officer (the “CEO”),

who is appointed and removed by the Board

and reports directly to it. The CEO is respon-

sible for the day-to-day management of the

Company’s subsidiaries, execution of strat-

egy, budgets, and Board decisions. The CEO

delegates his/her responsibilities to the other

members of the Executive Management

Team.

The Executive Management Team consists of

15 professionals including the CEO, benefit-

ting from the diversity among its members. All

the members of the Executive Management

Team other than the CEO are appointed and

removed, as applicable, by the Board upon

proposal by the N&R Committee after prior

consultation with the CEO, save where he is

subject to the procedure.

The full list of the members of the Executive

Management Team, including short biog-

raphies for each member is available on the

Company’s website.

Responsibilities of the Executive Management

Team are described in more detail in the Com-

pany’s Corporate Governance Charter, avail-

able on the Company’s website.

Various committees are operating on the Ex-

ecutive Management Team level, including

the Strategic Committee, the Investment Com-

mittee, the Trade Committee, and the Risk

Committee.

Remuneration report

This remuneration report is published in ac-

cordance with article 7ter of the same law, the

Luxembourg law of 24 May 2011 on the exer-

cise of certain rights of shareholders at gen-

eral meetings, as amended.

The compensation principles for the Board

and the Executive Management Team are

specified in the Remuneration Policy of the

Company. The Group pays remuneration to

the Board and the Executive Management

Team only in accordance with the Remunera-

tion Policy. The Remuneration Policy must be

submitted to a vote by the general meeting at

every material change and, in any case, at

least every four years.

The AGM held on 11 December 2023:

• approved an amendment to the long-term

management incentive plan in the form of

share put option agreements; and

• approved the Remuneration Policy, follow-

ing the requirements of Article 7bis of the

Luxembourg law of 24 May 2011 on the ex-

ercise of certain rights of shareholders at

general meetings, as amended.

Remuneration of the Board

Compensation of the Directors of the Com-

pany is comprised only of the fixed fees paid

for the services provided by the Directors in

their capacity as members of the Board of Di-

rectors of the Company. There is no perfor-

mance-based variable component, pension,

retirement, or similar benefits provided by the

Company. This ensures a certain degree of in-

dependence when it comes to fulfilling the

Board’s duties towards the Executive Man-

agement Team. On top of that, Directors are

reimbursed for certain travel, hotel, and other

expenses related to the exercise of their du-

ties. The fees paid to the independent direc-

tors and the fees paid to executive directors

are approved at the annual general sharehold-

ers’ meeting. See more details on the remu-

neration of the Board in the Remuneration Pol-

icy of the Company.

Three executive Directors in their capacity as

members of the Executive Management Team

also receive compensation for their services

provided to subsidiaries of the Company, with

such compensation being paid by the subsidi-

aries of the Company. One other executive Di-

rector not being a member of the Executive

Management Team also receives compensa-

tion as an employee of the Company.

Non-executive Directors are reimbursed for

educational expenses related to enhancing

the competencies necessary for their duties.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Corporate Governance continued

Management

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Sustainability

Report

Corporate

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Financial

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Remuneration of the Executive Man-

agement Team

Compensation of the members of the Execu-

tive Management Team (15 people in total) is

based on a pay-for-performance principle, re-

warding sustainable growth and long-term

value creation for shareholders of the Com-

pany. A significant portion of the remuneration

comes from a variable part depending on the

Group’s consolidated financial performance.

For details, please see the figure below.

The principles of the remuneration of the Ex-

ecutive Management Team are specified in

the Remuneration Policy.

Members of the Executive Management Team

are not granted any pension, retirement, or

similar benefits provided by the Company,

apart from those required by the law.

The Company believes that the Remuneration

Policy strongly contributes to the long-term

shareholder value creation and the Com-

pany’s stability.

Nomination and Remuneration Com-

mittee

The Nomination and Remuneration

Committee is a continuously operating collec-

tive body of the Board. It is established from

among the members of the Board and con-

sists of three members, including a chairman

elected by the members of the N&R Commit-

tee amongst themselves. The majority of the

members of the N&R Committee (including

the chairman) are non-executive independent

Directors.

The role of the N&R Committee is to assist the

Board in fulfilling its responsibilities by review-

ing, advising, and making recommendations

to the Board, the Chairman, and the CEO on

the nomination to the Board and Executive

Compensation structure of the Executive Management Team

Fixed

remuneration

Members of the Executive Management Team receive a base salary determined at the discretion of the Board, commensurate

with the respective position and the individual profile of the relevant members in terms of qualifications, skill set, and experi-

ence. All amounts are fixed and shall be paid monthly. In FY2024, the aggregated base salary for 15 members of the Exec-

utive Management Team amounted to USD 3,074 thousand paid by the subsidiaries of the Company.

Variable

remuneration

An annual variable monetary bonus (if applicable) is paid as well. Such bonus is determined by the formula approved by the

Board of Directors upon the recommendation of the N&R Committee. The bonus shall reward the members of the Executive

Management team for the financial performance of the Group, which derives from the financial performance of each of its

subsidiaries where each respective member of the Executive Management Team is employed or has contractual obligations.

The structure of the variable remuneration is as follows:

• The bonus pool for 13 members of the Executive Management Team (the “Bonus Pool”) is expressed as a percentage of

the consolidated EBITDA of the Group less the consolidated financial costs of the Group normalized for the effect of certain

one-off and nonrecurring transactions (“EBITDA Less Finance Costs”), with a minimum threshold level of USD 123 million

required to activate the pay-out. The Bonus Pool as a percentage of EBITDA Less Finance Costs is gradually increasing

starting from 0.46% of EBITDA Less Finance Costs in case EBITDA Less Finance Costs exceeds USD 123 million and

reaching 3.66% of EBITDA Less Finance Costs in case EBITDA Less Finance Costs exceeds USD 443 million. The exact

allocation of the Bonus Pool between the relevant members of the Executive Management Team is determined by the

N&R Committee.

• Two members of the Executive Management Team have different metrics determining their variable remuneration, includ-

ing the financial results of the business divisions they lead, the Group EBITDA and personal key performance indicators.

The variable remuneration is paid by the subsidiaries of the Company for duties and services provided by members of the

Executive Management Team to subsidiaries of the Company. In FY2024, the aggregated variable remuneration for 15 mem-

bers of the Executive Management Team amounted to USD 24,000 thousand to be paid by the subsidiaries of the Company.

Long-term

management

incentive

plan

Six members of the Executive Management Team are subject to the long-term management incentive plan which shall reward

such members of the Executive Management Team for accomplishing individual performance goals related to the duties and

services provided by such individuals to subsidiaries of the Company, altogether contributing to the better financial and non-

financial results of the group of companies to which the Company belongs over the long-term period and aligning the interests

of the Executive Management Team with those of the shareholders of the Company. The long-term management incentive

plan is duly reviewed by the N&R Committee and approved by the Board of Directors after the generic terms thereof having

been approved by the general meeting of shareholders. Six members of the Executive Management Team are granted with

put options providing the right but not the obligation to sell a fixed number of Company’s shares owned by management at

the moment at Put Price during the exercise period:

• exercise period shall commence on 1 November 2024 and end on 31 December 2025 (or in certain cases 31 December

2026), if no put options are exercised during Exercise Period, then such put options shall lapse. Put option also provides

for acceleration events which dictate that the put options may be exercised before the commencement of the exercise

period if the following events occur: 1) the cessation of trading of Company's shares at the Warsaw Stock Exchange or

any other recognized stock exchange; or 2) a change of control event where the shareholding of Namsen Limited or its

ultimate beneficial owner in Kernel's total votes falls below twenty five percent (25%). In such cases, put options may be

exercised only after 12 months following the occurrence of the relevant events.

• Put Price is determined as lower of (1) USD 23.80; or (2) operating profit before working capital changes minus interest

paid plus interest received minus interest tax paid, minus maintenance capital expenditures in the fixed amount of USD

155,000,000, where all amounts, except for the maintenance capital expenditures, are specified in USD in the relevant

paragraph of the consolidated statement of cash flows of the audited annual consolidated accounts of the Company and

its subsidiaries for the Financial Years 2022-2024, divided by 3 divided by 12% and divided by 84,031,230.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

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Management Team and their remuneration.

The N&R Committee assists the Board in

nominating and assessing candidates for both

directorship and managerial positions, estab-

lishing and reviewing the compensation princi-

ples specified in the Remuneration Policy. The

N&R Committee ensures that only persons

with adequate competencies, experience, and

skills are appointed to the Board. The N&R

Committee also supports the Board in prepar-

ing the Board’s remuneration proposals for the

shareholders’ general meeting. A detailed list

of N&R Committee responsibilities is available

in the Corporate Governance Charter, pub-

lished on the Company’s website.

Nomination and Remuneration Com-

mittee’s activity report

The N&R Committee held three meetings dur-

ing the reporting period, discussing the nomi-

nation of the new Director, the performance of

the CEO and the Executive Management

Team, the remuneration of the executive man-

agement team, and amendments to the man-

agement incentive plans.

At the additional meeting held in October

2024, the N&R Committee settled on the Ex-

ecutive Management Team compensation for

FY2024 standing at USD 27,074 thousand (in-

cluding a bonus of USD 24,000 thousand) for

15 key executives, as compared to the total

compensation of USD 20,585 thousand (in-

cluding a bonus of USD 17,902) a year ago for

15 executives.

Accountability and audit

Going concern

The Group’s business activities, together with

the factors affecting its performance, position,

and future development are set out in the man-

agement report on pages 1-38.

The financials

of the Group, its liquidity position, borrowing

facilities, and applicable terms are described

in the financial statement’s accounts.

Current economic conditions have fostered

the development of several risks and uncer-

tainties for the Company, in particular, related

to the war in Ukraine (see details in the Risks

and Uncertainties section of this report).

The Directors have reviewed the current and

projected financial position of the Company,

making reasonable assumptions about the fu-

ture trading and production performance, as

well as the debt requirements. The results

show that the Company should be able to

operate within the levels of its available

capital. Therefore, the Board has a reasona-

ble expectation that the Company has ade-

quate resources to continue in operational ex-

istence for the foreseeable future. Accord-

ingly, the Board continues to adopt the going

concern basis in preparing the annual report

and accounts.

Takeover disclosure

The Company’s shares are in electronic form

(77,429,230 shares) and registered form

(216,000,000 shares) and are freely transfer-

able, subject only to the provisions of law and

the Company’s Articles of Association. There

are no agreements between the Company and

its employees or directors providing for com-

pensation for the loss of office or employment

(whether through resignation, purported re-

dundancy, or otherwise) that would occur be-

cause of a takeover bid. Put options granted

under management incentive plans incorpo-

rate accelerated vesting in the event of a take-

over.

The Company in the ordinary course of busi-

ness has entered into various agreements

with customers and suppliers around the

world. Some of the Company’s borrowing

agreements, which either by their nature or

value may represent significant agreements,

do provide for the right of termination upon a

change of control of the Company. The com-

mercial sensitivity of these agreements pre-

vents their details from being disclosed.

Except for the preceding disclosure, there are

no other significant agreements to which the

Company is a party that take effect, alter, or

terminate upon a change of control following a

takeover of the Company.

Audit Committee

The Audit Committee is a continuously operat-

ing collective body of the Board. It consists of

three members including a chairman, all of

whom are non-executive directors and two of

whom meet the independence criteria. The

members have competence in accounting and

audit, and competence relevant to the sector

in which the company is operating. The Audit

Committee is fully capable of overseeing the

affairs of the Company in the areas of

adequacy and effectiveness of the Kernel’s

system of financial reporting, corporate gov-

ernance, internal controls, and risk manage-

ment.

The functioning and key responsibilities of the

Audit Committee are described in the Articles

of Association and further specified in the Cor-

porate Governance Charter.

Audit Committee activity report

The Audit Committee had seven meetings in

FY2024, including one in-person in Luxem-

bourg and the rest via teleconference. The av-

erage attendance rate for all Directors was

100% for the reporting period.

The Chief Financial Officer was invited and at-

tended all the meetings of the Audit Commit-

tee. Additionally, the Audit Committee invited

the CEO, head of internal audit, compliance

officer, sustainability manager, and head of re-

porting and controls to its meetings. The rep-

resentatives of the external auditor (PwC)

were invited and attended three meetings of

the Audit Committee. During its meetings, the

Audit Committee had one closed session with

the external auditor and one session with the

internal auditor to communicate without the

presence of executives. Additionally, the deci-

sions of the Audit Committee were taken via

two circular resolutions signed throughout

FY2024.

To execute its key functions and discharge its

responsibilities as outlined in the Corporate

Governance Charter, the Audit Committee,

during FY2024:

• assisted the Board in monitoring the relia-

bility and integrity of the financial infor-

mation provided. The committee reviewed

the consolidated quarterly, semi-annual,

and annual financial reports of the Group,

standalone annual accounts of the Com-

pany, Avere financial statements, reviewed

critical accounting policies and manage-

ment estimates, among other things;

………………………………………………………………………………………………………………………………………..............

Remuneration of the Board of Directors

USD thousands

FY2020

FY2021

FY2022

FY2023

FY2024

Chairman of the Board

200

Other executive Directors

Non-executive Directors

260

275

240

Total Board of Directors

500

515

480

Excluding reimbursement of travelling expenses incurred by Directors in performing their duties.

………………………………………………………………………………………………………………………………………..............

Remuneration of the Executive Management Team

USD thousands

FY2020

FY2021

FY2022

FY2023

FY2024

Total remuneration

8,834

29,334

8,492

20,585

27,074

Base salary

2,508

2,834

2,949

2,683

3,073

Short-term variable bonus

6,326

26,500

5,543

17,902

24,000

Number of executive managers

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

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• conducted oversight over the perfor-

mance of the internal audit function, in-

cluding the review of the internal audit activ-

ities and action plans and reports. The Audit

Committee had one face-to-face discussion

with internal auditors in the absence of ex-

ecutives;

• conducted oversight over the perfor-

mance of the external audit function in-

cluding review of the annual audit plan and

scope of semiannual accounts review and

areas of focus, review of auditor reports,

presentations and additional auditors’ re-

port, and management letter review. The

Audit Committee had one face-to-face dis-

cussion with the external auditors in the ab-

sence of executives. The Audit Committee

monitored the fee cap of non-audit services,

and reviewed the contract with auditors (in-

cluding a review of expected fees for the au-

dit and consulting services) and the inde-

pendence of the external auditor;

• conducted oversight over the risk man-

agement function. The Audit Committee

assisted the Board in the discharge of its

risk management responsibilities, monitor-

ing and examining the effectiveness of the

Company’s internal control and risk moni-

toring system; reviewing top risks, risk miti-

gation plans, and results of risk mitigation

activities, overseeing group risk manage-

ment procedures; reviewing trade manage-

ment position risk mitigation activities; re-

view of climate physical and transitional

risks relevant to Kernel’s operations;

• conducted oversight over the compliance

function, including implementation of the

Corporate Governance Charter provisions,

compliance with good corporate govern-

ance practices concerning the functioning of

the Audit Committee, and reviewing reports

from the Kernel Compliance Officer on the

progress achieved in the enhancement of

the Company’s compliance function;

• discussed various ad-hoc items.

After each meeting, the chairman of the Audit

Committee reports to the Board on key mat-

ters discussed.

Throughout FY2024, the Audit Committee

conducted an annual self-evaluation proce-

dure, which indicated potential areas of Audit

Committee performance and activities im-

provement and resulted in a clear action plan

based on the results of the self-evaluation pro-

cedure.

Additionally, in 2024, the Audit Committee

conducted an assessment of the efficiency of

internal control, risk management and compli-

ance systems, and internal audit function. The

Audit Committee agreed that the overall as-

sessment of the internal control and risk man-

agement system is rather effective, the overall

assessment of the compliance system is

effective, and the overall assessment of the in-

ternal audit function is effective.

Internal audit

As an integral part of the system of internal

control, the Company has an internal audit de-

partment headed by an experienced profes-

sional reporting directly to the Board of Direc-

tors via the Audit Committee and to the CEO

of the Company as a chairman of the Risk

Committee within the Executive Management

Team, and working closely with the Board. In-

ternal audit is a separate independent unit in

the Group’s organizational structure.

Internal Audit provides independent and ob-

jective assurance and consulting services in

the areas of corporate governance, internal

controls, and risk management, aimed at im-

proving the operations and performance of the

Company and its subsidiaries. The efficient in-

ternal audit function is adequate to the size of

the Company and the type of and scale of the

Company’s activities.

The independence rules defined in generally

accepted international standards of the pro-

fessional internal audit practice apply to mem-

bers of the internal audit department.

The main responsibilities of the internal audit

are:

• to maintain continuous support for the Di-

rectors on risk management, internal con-

trols, and mitigation activities by undertak-

ing regular or ad hoc reviews;

• to provide an independent and objective

evaluation of the effectiveness and effi-

ciency of corporate governance, internal

control, and risk-management systems

within the operational framework of the

Company;

• to assist personnel and management of the

Company in improving the effectiveness of

risk identification and internal control sys-

tems in operations; advise and consult them

regarding how to effectively execute their

responsibilities, including recommendations

on specific improvements in policies and

procedures; and

• to assist in open and two-way communica-

tion among internal and external auditors,

management and personnel, the Audit

Committee, and the Board.

The Head of internal audit regularly presents

the results of its work to the Audit Committee,

including communication with the committee

members in the absence of executives.

External audit

PwC Société cooperative (“PwC”), with its reg-

istered office at 2, rue Gerhard Mercator B.P.

1443 L-1014 Luxembourg and register num-

ber B 65 477 with the Luxembourg Trade and

Companies Register, acts as an external au-

ditor of Kernel’s consolidated and standalone

accounts since FY2022.

PwC attended three meetings of the Audit

Committee in FY2024, presenting the review

of the semi-annual accounts, and audit plan

for FY2024, and presenting to the Audit Com-

mittee the approach to accounting and audit of

various business operations, among other

things. The Audit Committee reviews and

monitors the level of fees paid by the Com-

pany to the external auditor, preapproves per-

missible non-audit services, and monitors the

cap on non-audit fees.

Remuneration to auditors in FY2024

amounted to USD 804 thousand (including

USD 26 thousand non-audit services), as

compared to USD 781 thousand in FY2023.

Sustainable development

The sustainability function at Kernel is gov-

erned by the Board via a Sustainability Com-

mittee, which has the purpose of overseeing

the overall performance of the sustainability

corporate function of the Company and the

Group; ensuring the implementation of the en-

vironmental, social, and sustainability govern-

ance agendas across all business operations;

and connect these agendas with the Group’s

strategy, business objectives, and capital allo-

cation decisions.

The Sustainability Committee had two meet-

ings during the reporting period, discussing

the following:

• business opportunities related to the sus-

tainability function and climate change;

• the EY summary presentation related to the

project “Climate Corporate Governance and

Low-Carbon Pathway”;

• reporting requirements in accordance with

the Corporate Sustainability Reporting Di-

rective;

• registration of the Poltava Oil Extraction

plant as the first company in the Ukrainian

……………………………………………………………………..

External auditor’s fees

USD thousand

739

717

526

781

778

249

294

257

988

1,011

783

781

804

FY2020 FY2021 FY2022 FY2023 FY2024

Audit fees Non-audit services

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Corporate Governance continued

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

food sector committed to the Science Based

Targets initiative.

Business ethics and compli-

ance

Kernel has embedded strong ethical stand-

ards in the Company’s everyday operations,

as outlined in the Code of Conduct. Addition-

ally, the AGM held on 10 December 2021 ap-

proved the Diversity, Equality, and Inclusion

Policy of the Company and its subsidiaries.

In December 2016, Kernel initiated a Corpo-

rate Compliance Program (“CCP”) – an ac-

tion plan to bring the Company’s compliance

system in accordance with the best interna-

tional standards. Progress on CCP implemen-

tation was monitored each quarter by Baker

Tilly, with the final report presented in the sum-

mer of 2019, after completion of the CCP in

June 2019. Baker Tilly recognized significant

progress achieved in the implementation of

Kernel’s Compliance Program due to the ac-

tual execution of both internal and external

control activities, also highlighting the aspects

for further continuous improvement.

Since 2017, the compliance function within

Kernel has been led by a dedicated compli-

ance officer, who reports directly to the CEO

and Board of Directors via the Audit Commit-

tee of the Board. The compliance officer at-

tends all Audit Committee meetings and pro-

vides compliance system and control updates

at least twice a year.

We prioritize strong relationships with counter-

parties, assessing their risks based on trust-

worthiness, corruption, and sanctions in line

with our risk appetite. Anti-corruption and anti-

sanctions clauses are included in all contracts

with counterparties. These clauses consider

both national and foreign legislation require-

ments in connection with the Russian war in-

vasion of Ukraine. We’ve updated our anti-cor-

ruption provisions to align with legislative

changes, strengthened controls, enhanced

due diligence processes, and revised contract

templates and clauses accordingly.

Since 2019 Kernel has been a member of the

Ukrainian Network of Integrity and Compli-

ance (UNIC) and a signatory of the UN Global

Compact and the Memorandum of UN Collec-

tive Action to Combat Corruption. These plat-

forms are effective for sharing best practices

in preventing corruption between companies

and promoting a corporate culture of integrity

in the agricultural sector.

In recent years, Kernel has made continuous

efforts to promote gender equality and inclu-

sion, actively creating and supporting favora-

ble workplaces. Gender diversity and equality

are core values, with dignity and honesty at

the foundation. Kernel remains committed to

addressing gender asymmetry across all ar-

eas of the company.

During 2023-2024, we strengthened our com-

pliance system and integrated additional con-

trols and instruments, including:

• Prohibition of any cooperation with counter-

parties from Russia;

• Implementation of an Anti-Sanctions Policy;

• Launch of the Compliance School for Kernel

counterparties to share knowledge on com-

pliance and ethics;

• annual conflict of interest declaration;

• Introduction of the UN General Assembly’s

"Anti-corruption" video course for approxi-

mately 6,000 employees;

• In-person compliance training for more than

100 employees.

Kernel’s compliance efforts focus on:

• preventing fraud, corruption, and other

misconduct (see details in section Anti-cor-

ruption);

• managing risks related to unreliable

counterparties and international sanc-

tions. Compliance officer and security de-

partment check business partners for com-

pliance risks: sanctions, corruption, money

laundering, terrorism financing;

• ensuring the Company’s activities comply

with various external initiatives (GDPR;

United Nations Global Compact; equality,

diversity, and inclusion initiatives, etc.);

• ensuring employee adherence to internal

policies, including the Code of Conduct,

Policy for managing conflicts of interest,

combating fraud and corruption, and other

internal documents on compliance. The

compliance officer oversees incident man-

agement for all stakeholders.

To enhance employee awareness of business

ethics, we offer an e-learning course on the

Code of Conduct. All new employees must

achieve a minimum 80% pass rate during

onboarding.

PricewaterhouseCoopers, Société coopérative, 2 rue Gerhard Mercator, B.P. 1443, L-1014 Luxembourg

T : +352 494848 1, F : +352 494848 2900, www.pwc.lu

Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)

R.C.S. Luxembourg B 65 477 - TVA LU25482518

Audit report

To the Shareholders of

Kernel Holding S.A.

Report on the audit of the consolidated financial statements

Our qualified opinion

In our opinion, except for the possible effects of the matter described in the “Basis for qualified opinion”

section of our report, the accompanying consolidated financial statements give a true and fair view of

the consolidated financial position of Kernel Holding S.A. (the “Company”) and its subsidiaries (the

“Group”), as at 30 June 2024, and of its consolidated financial performance and its consolidated cash

flows for the year then ended in accordance with IFRS Accounting Standards as adopted by the

European Union.

Our opinion is consistent with our additional report to the Audit Committee or equivalent.

What we have audited

The Group’s consolidated financial statements comprise:

• the consolidated statement of financial position as at 30 June 2024;

• the consolidated statement of profit or loss for the year then ended;

• the consolidated statement of profit or loss and other comprehensive income for the year then ended;

• the consolidated statement of changes in equity for the year then ended;

• the consolidated statement of cash flows for the year then ended; and

• the notes to the consolidated financial statements, including material accounting policy information

and other explanatory information.

Basis for qualified opinion

As disclosed in Note 17, the Group disposed of all of its crypto assets during the year ended

30 June 2023, recording a loss on transactions with crypto assets of USD 2,412 thousand, as disclosed

within the line Loss on impairment of assets in the consolidated statement of profit or loss (Note 30).

We have not obtained sufficient appropriate evidence to verify the opening balance of crypto assets as

at 30 June 2022 and transactions in crypto assets during the year ended 30 June 2023 due to the lack

of formalised controls around the authenticity of digital records. Consequently, we were unable to

determine whether any adjustments to the crypto asset balances as at 30 June 2022 or loss recorded

on transactions in crypto assets during the year ended 30 June 2023 were necessary. Our auditor’s

report for the year ended 30 June 2023 was qualified for this matter.

Our opinion on the consolidated financial statements for the year ended 30 June 2024 is also qualified

because of the possible effect of this matter on the comparability of the current period’s figures and the

corresponding figures.

We conducted our audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016

on the audit profession (Law of 23 July 2016) and with International Standards on Auditing (ISAs) as

adopted for Luxembourg by the “Commission de Surveillance du Secteur Financier” (CSSF).

Our responsibilities under the EU Regulation No 537/2014, the Law of 23 July 2016 and ISAs as

adopted for Luxembourg by the CSSF are further described in the “Responsibilities of the “Réviseur

d’entreprises agréé” for the audit of the consolidated financial statements” section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for

our qualified opinion.

We are independent of the Group in accordance with the International Code of Ethics for Professional

Accountants, including International Independence Standards, issued by the International Ethics

Standards Board for Accountants (IESBA Code) as adopted for Luxembourg by the CSSF together with

the ethical requirements that are relevant to our audit of the consolidated financial statements. We have

fulfilled our other ethical responsibilities under those ethical requirements.

To the best of our knowledge and belief, we declare that we have not provided non-audit services that

are prohibited under Article 5(1) of the EU Regulation No 537/2014.

The non-audit services that we have provided to the Company and its controlled undertakings, if

applicable, for the year then ended, are disclosed in Note 29 to the consolidated financial statements.

Material uncertainty related to going concern

We draw attention to Note 4 in the consolidated financial statements, which highlights that since

24 February 2022 the Group's operations are significantly affected by the ongoing military invasion of

Ukraine and the magnitude of further developments or the timing of the cessation of these

circumstances, are uncertain. As stated in Note 4, these events or conditions, along with other matters

as set forth in Note 3, indicate that a material uncertainty exists that may cast significant doubt on the

Group’s ability to continue as a going concern. Our opinion is not modified in respect of this matter.

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our

audit of the consolidated financial statements of the current period. These matters were addressed in

the context of our audit of the consolidated financial statements as a whole, and in forming our opinion

thereon, and we do not provide a separate opinion on these matters.

In addition to the matter described in the “Basis for qualified opinion” section and in the “Material

Uncertainty Related to Going Concern” section, we have determined the matters described below to be

key audit matters to be communicated in our report.

Key audit matter

How our audit addressed the key audit matter

Impairment of property, plant and

equipment in the oilseed processing

segment

As of 30 June 2024, the Group has

property, plant and equipment

Our audit procedures included the following:

- Analysing judgements made in determining the CGUs.

- Engaging our internal valuation experts to assess the

appropriateness of the methodology applied by the Group in

(“PP&E”) in the oilseed processing

segment with a carrying amount of

USD 506 million.

During the reporting period,

management identified impairment

indicators, and performed

impairment tests of property, plant

and equipment, as required by

IAS 36 Impairment of Assets.

Impairment was tested by

comparing the carrying amount of

the relevant Cash-generating unit

(“CGU”) with its recoverable

amount, which was determined for

each CGU as higher of value in use

and fair value less cost of disposal.

The assumptions with the most

significant impact on the

recoverable amount calculations

were sales prices of sunflower oil,

transportation costs, purchase price

of sunflower seeds, processing

volume and discount rates for the

oilseed processing segment .

Taking into account significant

management judgements and

magnitude of the amounts involved,

we considered this to be a key audit

matter.

Refer to Notes 5 and 15 to the

consolidated financial statements

for the related disclosures.

calculating the CGUs recoverable amounts and to assess

reasonableness of the discount rates used.

- Evaluating management's ability to reasonably estimate

cash flow forecasts by comparing actual results to

management's historical forecasts.

- Evaluating and challenging significant assumptions used by

management in CGUs recoverable amount calculations,

such as purchase price of sunflower seeds, sales prices of

sunflower oil, processing volume and transportation costs,

based on the internal and external data which supports these

assumptions.

- Checking the sensitivity analysis over significant

assumptions used.

- Verifying the mathematical accuracy and integrity of

calculations and the adequacy of the Group’s disclosures in

Notes 5 and 15 to the consolidated financial statements.

Impairment of goodwill in the

oilseed processing segment

In the year ended 30 June 2024, the

Group recognised a goodwill

impairment charge related to the

oilseed processing segment in the

amount of USD 58 million as the

result of the impairment test

required by IAS 36 Impairment of

Assets.

Our audit procedures included the following:

- Analysing judgements made in determining the CGUs.

- Engaging our internal valuation experts to assess the

appropriateness of the methodology applied by the Group in

calculating the CGUs recoverable amount and to assess the

reasonableness of the discount rates used.

- Evaluating management’s ability to reasonably estimate

cash flow forecasts by comparing actual results to

management’s historical forecasts.

For the purpose of an impairment

test, management calculated the

recoverable amount of each CGU to

which goodwill is allocated, as the

higher of value in use and fair value

less costs of disposal.

The assumptions with the most

significant impact on the cash flow

forecasts were sales prices of

sunflower oil, purchase price of

sunflower seeds, transportation

costs, processing volume and

discount rates for the oilseed

processing segment.

Taking into account significant

management judgements and

magnitude of the amounts involved,

we considered this to be a key audit

matter.

Refer to Notes 5 and 18 to the

consolidated financial statements

for the related disclosures.

- Evaluating and challenging significant assumptions used by

management in CGUs recoverable amount calculations,

such as the sales prices of sunflower oil, purchase price of

sunflower seeds and transportation costs and processing

volume based on the internal and external data which

supports these assumptions.

- Checking the sensitivity analysis over significant

assumptions used.

- Verifying the mathematical accuracy and integrity of

calculations and the adequacy of the Group’s disclosures in

Notes 5 and 18 to the consolidated financial statements.

Valuation of current biological

assets

The Group measures biological

assets at the fair value less costs to

sell in accordance with IAS 41

Agriculture and IFRS 13 Fair Value

Measurement. As of 30 June 2024,

the Group has current biological

assets comprising mainly winter and

spring crops of the 2023/24 season,

which were not yet harvested in the

amount of USD 188 million.

The Group calculates the fair value

less costs to sell on the basis of the

discounted cash flow forecasts,

applying the following significant

assumptions:

• crop yields;

Our audit procedures included the following:

- Gaining an understanding of management’s process for

development of significant assumptions used by

management in the valuation and assessing the

appropriateness of valuation methodology applied.

- Evaluating and challenging significant assumptions used in

the valuation, such as crop yields and grain sales prices net

of transportation costs, based on the internal and external

data which supports these assumptions.

- Checking the sensitivity analysis over significant

assumptions used.

- Verifying the mathematical accuracy and integrity of

calculations and the adequacy of the Group’s disclosures in

Note 5 and 13 to the consolidated financial statements.

• grain sales prices net of

transportation costs.

Taking into account significant

management judgements and

magnitude of the amounts involved,

we considered this to be a key audit

matter.

Refer to Note 5 and 13 to the

consolidated financial statements

for the related disclosure.

Other information

The Board of Directors is responsible for the other information. The other information comprises the

information stated in the annual report including the Directors' report and the Corporate Governance

Statement but does not include the consolidated financial statements and our audit report thereon.

Our opinion on the consolidated financial statements does not cover the other information and we do

not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the

other information identified above and, in doing so, consider whether the other information is materially

inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or

otherwise appears to be materially misstated. If, based on the work we have performed, we conclude

that there is a material misstatement of this other information, we are required to report that fact.

As described in the “Basis for qualified opinion” section above, we were unable to obtain sufficient

appropriate audit evidence to verify the opening balance of crypto assets as at 30 June 2022 and

transactions in crypto assets during the year ended 30 June 2023. Accordingly, we are unable to

conclude whether or not the other information is materially misstated with respect to this matter.

Responsibilities of the Board of Directors for the consolidated financial statements

The Board of Directors is responsible for the preparation and fair presentation of the consolidated

financial statements in accordance with IFRS Accounting Standards as adopted by the European Union,

and for such internal control as the Board of Directors determines is necessary to enable the preparation

of consolidated financial statements that are free from material misstatement, whether due to fraud or

error.

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.

The Board of Directors is responsible for presenting and marking up the consolidated financial

statements in compliance with the requirements set out in the Delegated Regulation 2019/815 on

European Single Electronic Format (“ESEF Regulation”).

Responsibilities of the “Réviseur d’entreprises agréé” for the audit of the consolidated financial

statements

The objectives of our audit are to obtain reasonable assurance about whether the consolidated financial

statements as a whole are free from material misstatement, whether due to fraud or error, and to issue

an audit report that includes our opinion. Reasonable assurance is a high level of assurance, but is not

a guarantee that an audit conducted in accordance with the EU Regulation No 537/2014, the Law of

23 July 2016 and with ISAs as adopted for Luxembourg by the CSSF will always detect a material

misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,

individually or in the aggregate, they could reasonably be expected to influence the economic decisions

of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with the EU Regulation No 537/2014, the Law of 23 July 2016 and

with ISAs as adopted for Luxembourg by the CSSF, we exercise professional judgment and maintain

professional scepticism throughout the audit. We also:

• identify and assess the risks of material misstatement of the consolidated financial statements,

whether due to fraud or error, design and perform audit procedures responsive to those risks, and

obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of

not detecting a material misstatement resulting from fraud is higher than for one resulting from error,

as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of

internal control;

• obtain an understanding of internal control relevant to the audit in order to design audit procedures

that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the

effectiveness of the Group’s internal control;

• evaluate the appropriateness of accounting policies used and the reasonableness of accounting

estimates and related disclosures made by the Board of Directors;

• conclude on the appropriateness of the Board of Directors’ use of the going concern basis of

accounting and, based on the audit evidence obtained, whether a material uncertainty exists related

to events or conditions that may cast significant doubt on the Group’s ability to continue as a going

concern. If we conclude that a material uncertainty exists, we are required to draw attention in our

audit report to the related disclosures in the consolidated financial statements or, if such disclosures

are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up

to the date of our audit report. However, future events or conditions may cause the Group to cease

to continue as a going concern;

• evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements represent the underlying

transactions and events in a manner that achieves fair presentation;

• obtain sufficient appropriate audit evidence regarding the financial information of the entities and

business activities within the Group to express an opinion on the consolidated financial statements.

We are responsible for the direction, supervision and performance of the Group audit. We remain

solely responsible for our audit opinion.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant

ethical requirements regarding independence, and communicate to them all relationships and other

matters that may reasonably be thought to bear on our independence, and where applicable, actions

taken to eliminate threats or safeguards applied.

From the matters communicated with those charged with governance, we determine those matters that

were of most significance in the audit of the consolidated financial statements of the current period and

are therefore the key audit matters. We describe these matters in our audit report unless law or

regulation precludes public disclosure about the matter.

We assess whether the consolidated financial statements have been prepared, in all material respects,

in compliance with the requirements laid down in the ESEF Regulation.

Report on other legal and regulatory requirements

The Directors' report is consistent with the consolidated financial statements and has been prepared in

accordance with applicable legal requirements.

The Corporate Governance Statement is included in the Directors' report. The information required by

Article 68ter Paragraph (1) Letters c) and d) of the Law of 19 December 2002 on the commercial and

companies register and on the accounting records and annual accounts of undertakings, as amended,

is consistent with the consolidated financial statements and has been prepared in accordance with

applicable legal requirements.

We have been appointed as “Réviseur d’Entreprises Agréé” by the General Meeting of the Shareholders

on 11 December 2023 and the duration of our uninterrupted engagement, including previous renewals

and reappointments, is 3 years.

We have checked the compliance of the consolidated financial statements of the Group as at

30 June 2024 with relevant statutory requirements set out in the ESEF Regulation that are applicable to

consolidated financial statements.

For the Group it relates to the requirement that:

• the consolidated financial statements are prepared in a valid XHTML format;

• the XBRL markup of the consolidated financial statements uses the core taxonomy and the common

rules on markups specified in the ESEF Regulation.

In our opinion, the consolidated financial statements of the Group as at 30 June 2024 have been

prepared, in all material respects, in compliance with the requirements laid down in the ESEF

Regulation.

PricewaterhouseCoopers, Société coopérative

Represented by

@esig

Andrei Chizhov

Luxembourg, 28 October 2024

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

Statement of the Board of Directors’ Responsibilities for the

Preparation and Approval of the Consolidated Financial

Statements

for the year ended 30 June 2024

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The Board of Directors is responsible for the preparation, publishing and fair presentation of the consolidated financial statements in accordance

with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the consolidated financial statements, and for

such internal control as the Board of Directors determines is necessary to enable the preparation of consolidated financial statements that are free

from material misstatement, whether due to fraud or error.

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. (the ‘Company’) 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 that ended, and notes to the consolidated financial statements, including

a summary of significant accounting policies; and

• The Management 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.

28 October 2024

On behalf of the Board of Directors

Andrii Verevskyi Sergiy Volkov

Chairman of the Board of Directors Director, Chief Financial Officer

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

The accompanying notes are an integral part of these financial statements.

Selected Financial Data

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

USD

PLN

EUR

30 June

2024

30 June

2023

30 June

2024

30 June

2023

30 June

2024

30 June

2023

Revenue

3,581,462

3,455,121

14,534,289

15,483,636

3,312,136

3,306,205

II.

Profit from operating activities

276,428

439,460

1,121,800

1,969,378

255,641

420,519

III.

Profit before income tax

211,052

367,824

856,491

1,648,351

195,181

351,971

IV.

Profit for the period

167,628

298,774

680,268

1,338,913

155,022

285,897

Net cash generated by operating activities

472,136

716,132

1,916,022

3,209,245

436,631

685,267

VI.

Net cash (used in)/generated by investing activities

(112,548)

9,576

(456,742)

42,913

(104,084)

9,163

VII.

Net cash used in financing activities

(504,102)

(219,181)

(2,045,747)

(982,229)

(466,194)

(209,734)

VIII.

Total net cash flow

(144,514)

506,527

(586,467)

2,269,929

(133,647)

484,696

IX.

Total assets

3,396,911

3,885,169

13,696,345

15,954,835

3,175,432

3,585,234

Current liabilities

1,367,062

1,898,804

5,511,994

7,797,629

1,277,929

1,752,216

XI.

Non-current liabilities

163,555

242,370

659,454

995,316

152,891

223,659

XII.

Issued capital

7,749

2,219

31,244

9,113

7,244

2,048

XIII.

Total equity

1,866,294

1,743,995

7,524,897

7,161,890

1,744,612

1,609,359

XIV.

Weighted average number of shares

256,839,066

77,429,230

256,839,066

77,429,230

256,839,066

77,429,230

XV.

Profit per ordinary share (in USD/PLN/EUR)

0.65

3.86

2.65

17.32

0.60

3.70

XVI.

Diluted number of shares

256,839,066

77,429,230

256,839,066

77,429,230

256,839,066

77,429,230

XVII.

Diluted profit per ordinary share (in USD/PLN/EUR)

0.65

3.86

2.65

17.32

0.60

3.70

XVIII.

Book value per share (in USD/PLN/EUR)

6.35

22.50

25.60

92.40

5.94

20.76

XIX.

Diluted book value per share (in USD/PLN/EUR)

6.35

22.50

25.60

92.40

5.94

20.76

Please see Note 3 for the exchange rates used for conversion.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

The accompanying notes are an integral part of these financial statements.

Consolidated Statement of Financial Position

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Notes

As of

30 June 2024

As of

30 June 2023

Assets

Current assets

Cash and cash equivalents

9, 37

809,584

954,103

Trade accounts receivable

10, 34, 37

305,246

321,579

Prepayments to suppliers

120,870

135,044

Corporate income tax prepaid

227

3,595

Taxes recoverable and prepaid

114,127

162,280

Inventory

277,660

341,543

Biological assets

187,712

147,895

Other financial assets

14, 34, 37

339,929

376,063

Total current assets

2,155,355

2,442,102

Non-current assets

Property, plant and equipment

944,104

1,020,411

Right-of-use assets

172,931

205,644

Intangible assets

36,394

36,334

Goodwill

13,196

71,632

Deferred tax assets

35,626

21,353

Non-current financial assets

23,307

25,524

Other non-current assets

15,998

62,169

Total non-current assets

1,241,556

1,443,067

Total assets

3,396,911

3,885,169

Liabilities and equity

Current liabilities

Trade accounts payable

34, 37

109,672

158,567

Advances from customers and other current liabilities

20, 34

177,179

153,770

Corporate income tax liabilities

31,433

12,943

Short-term borrowings

315,166

869,933

Current portion of lease liabilities

27,206

31,160

Current bonds issued

597,580

596,211

Interest on bonds issued

24, 37

7,612

Other financial liabilities

21, 37

101,214

68,608

Total current liabilities

1,367,062

1,898,804

Non-current liabilities

Lease liabilities

142,534

166,735

Deferred tax liabilities

20,035

20,557

Other non-current liabilities

986

55,078

Total non-current liabilities

163,555

242,370

Equity attributable to Kernel Holding S.A. equity holders

Issued capital

7,749

2,219

Share premium reserve

457,935

500,378

Additional paid-in capital

39,944

Treasury shares

—

(96,897)

Revaluation reserve

96,178

104,303

Translation reserve

(1,029,114)

(932,089)

Retained earnings

2,291,951

2,123,999

Total equity attributable to Kernel Holding S.A. equity holders

1,864,643

1,741,857

Non-controlling interests

1,651

2,138

Total equity

1,866,294

1,743,995

Total liabilities and equity

3,396,911

3,885,169

Book value

1,864,643

1,741,857

Number of shares

2, 38

293,429,230

77,429,230

Book value per share (in USD)

6.35

22.50

Diluted number of shares

293,429,230

77,429,230

Diluted book value per share (in USD)

6.35

22.50

On behalf of the Board of Directors

Andrii Verevskyi Sergiy Volkov

Chairman of the Board of Directors Director, Chief Financial Officer

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

The accompanying notes are an integral part of these financial statements.

Consolidated Statement of Profit or Loss

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

On behalf of the Board of Directors

Andrii Verevskyi Sergiy Volkov

Chairman of the Board of Directors Director, Chief Financial Officer

Notes

For the year ended

30 June 2024

For the year ended

30 June 2023

Revenue

26, 34

3,581,462

3,455,121

Net change in fair value of biological assets and agricultural produce

(10,447)

(114,705)

Cost of sales

27, 34

(2,888,959)

(2,704,014)

Gross profit

682,056

636,402

Other operating income

71,071

53,547

Other operating expenses

(22,883)

(34,867)

General, administrative and selling expenses

29, 34

(213,373)

(205,019)

Net (impairment)/reversal of impairment losses on financial assets

(11,217)

4,130

Loss on impairment of assets

(229,226)

(14,733)

Profit from operating activities

276,428

439,460

Finance costs

(119,079)

(153,249)

Finance income

31, 34

49,819

30,792

Foreign exchange gain, net

32,972

62,650

Other expenses, net

33, 34

(29,088)

(11,829)

Profit before income tax

211,052

367,824

Income tax expenses

(43,424)

(69,050)

Profit for the period

167,628

298,774

Profit for the period attributable to:

Equity holders of Kernel Holding S.A.

167,952

299,192

Non-controlling interests

(324)

(418)

Earnings per share

Weighted average number of shares

256,839,066

77,429,230

Profit per ordinary share (in USD)

0.65

3.86

Diluted number of shares

256,839,066

77,429,230

Diluted profit per ordinary share (in USD)

0.65

3.86

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

The accompanying notes are an integral part of these financial statements.

Consolidated Statement of Profit or Loss and

Other Comprehensive Income

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Notes

For the year ended

30 June 2024

For the year ended

30 June 2023

Profit for the period

167,628

298,774

Other comprehensive income/(loss)

Items that will not be reclassified subsequently to profit or loss:

Loss on revaluation of property, plant and equipment

(9,909)

—

Income tax related to components of other comprehensive income

1,784

—

Items that may be reclassified subsequently to profit or loss:

Exchange differences on translating foreign operations

(97,188)

(241,000)

Other comprehensive loss

(105,313)

(241,000)

Total comprehensive income for the period

62,315

57,774

Total comprehensive income attributable to:

Equity holders of Kernel Holding S.A.

62,802

58,669

Non-controlling interests

(487)

(895)

On behalf of the Board of Directors

Andrii Verevskyi Sergiy Volkov

Chairman of the Board of Directors Director, Chief Financial Officer

Exchange differences on translating foreign operations increased mostly as a result of foreign exchange rate change.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

The accompanying notes are an integral part of these financial statements.

Consolidated Statement of Changes in Equity

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

On behalf of the Board of Directors

Andrii Verevskyi Sergiy Volkov

Chairman of the Board of Directors Director, Chief Financial Officer

Attributable to Kernel Holding S.A. shareholders

Issued

capital

premium

reserve

Additional

paid-in

capital

Treasury

Revalua-

tion

reserve

Translation

reserve

Retained

Earnings

Total

Non-

controlling

interests

Total

equity

Balance as of 30 June 2022

2,219

500,378

39,944

(96,897)

104,303

(816,490)

1,949,731

1,683,188

3,033

1,686,221

Profit for the period

—

299,192

(418)

298,774

Other comprehensive loss

—

(115,599)

(124,924)

(240,523)

(477)

(241,000)

Total comprehensive income for

the period

—

(115,599)

174,268

58,669

(895)

57,774

Balance as of 30 June 2023

2,219

500,378

39,944

(96,897)

104,303

(932,089)

2,123,999

1,741,857

2,138

1,743,995

Profit for the period

—

167,952

(324)

167,628

Other comprehensive loss

—

(8,125)

(97,025)

—

(105,150)

(163)

(105,313)

Total comprehensive income for

the period

—

(8,125)

(97,025)

167,952

62,802

(487)

62,315

Increase of share capital (Note 2)

5,704

54,280

—

59,984

—

59,984

Cancellation of treasury shares

(Note 2)

(174)

(96,723)

—

96,897

—

Balance as of 30 June 2024

7,749

457,935

39,944

—

96,178

(1,029,114)

2,291,951

1,864,643

1,651

1,866,294

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

The accompanying notes are an integral part of these financial statements.

Consolidated Statement of Cash Flows

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Notes

As of

30 June 2024

As of

30 June 2023

Operating activities:

Profit before income tax

211,052

367,824

Adjustments for:

Amortization and depreciation

104,723

104,786

Finance costs

119,079

153,249

Finance income

(49,819)

(30,792)

Net impairment/(reversal) losses on financial assets

11,217

(4,130)

Loss/(Gain) on disposal of property, plant and equipment

530

(621)

Net foreign exchange gain

(32,717)

(61,201)

Loss on impairment of assets

229,226

14,733

Write-downs of inventories to net realisable value

2,783

65,690

Net change in fair value of biological assets and agricultural produce

10,447

114,705

Net (gain)/loss arising on financial instruments

(16,540)

29,656

Other accruals

14,021

(1,089)

Operating profit before working capital changes

604,002

752,810

Changes in working capital:

Change in trade receivable

10,425

(177,380)

Change in other financial assets

(19,228)

(265,846)

Change in prepayments and other current assets

30,859

(70,235)

Change in restricted cash balance

—

Change in taxes recoverable and prepaid

36,391

2,733

Change in biological assets

(17,181)

73,662

Change in inventories

(16,899)

508,182

Change in trade accounts payable

(45,292)

1,063

Change in advances from customers and other current liabilities

(397)

55,396

Cash generated from operations

582,680

880,443

Interest paid

(110,878)

(148,436)

Interest received

32,777

28,128

Income tax paid

(32,443)

(44,003)

Net cash generated by operating activities

472,136

716,132

Investing activities:

Purchase of property, plant and equipment

(142,578)

(77,093)

Proceeds from disposal of property, plant and equipment

10,175

2,720

Payment for lease agreements

(1,426)

(1,825)

Purchase of intangible and other non-current assets

(2,489)

(10,223)

Proceeds from disposal of intangible and other non-current assets

—

123,436

Acquisition of subsidiaries, net of cash acquired

(24,745)

(12,031)

Disposal of subsidiaries

92,452

89,705

Placement of pledge deposits

—

(122,703)

Pledge deposits withdrawal

121,400

—

(Payment to acquire)/Proceeds from disposal of financial assets

(165,337)

17,590

Net cash (used in)/generated by investing activities

(112,548)

9,576

Financing activities:

Proceeds from borrowings

245,019

54,905

Repayment of borrowings

(790,455)

(247,717)

Financing for farmers

—

193

Repayment of lease liabilities

(20,046)

(23,179)

Proceeds from share premium reserve increase

54,280

—

Issued capital

5,704

—

Net cash used in financing activities

(505,498)

(215,798)

Effects of exchange rate changes on the balance of cash held in foreign currencies

1,396

(3,383)

Net (decrease)/increase in cash and cash equivalents

(144,514)

506,527

Cash and cash equivalents, at the beginning of the year

954,093

447,566

Cash and cash equivalents, at the end of the year

809,579

954,093

For non-cash financing activities please see Note 9.

On behalf of the Board of Directors

Andrii Verevskyi Sergiy Volkov

Chairman of the Board of Directors Director, Chief Financial Officer

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

1. Corporate Information

Kernel Holding S.A. (hereinafter referred to as the ‘Holding’ or the ‘Company’) incorporated under the legislation of Luxembourg on 15 June 2005

(number B 109,173 in the Luxembourg Register of Companies) is the holding company for a group of entities (hereinafter referred to as the

‘Subsidiaries’), which together form Kernel Group (hereinafter referred to as the ‘Group’ or the ‘Kernel Group’).

Kernel Holding S.A. has been a publicly traded company since 2007. Kernel Holding S.A. made an announcement on 13 April 2023, indicating

that their Board of Directors had decided to withdraw the company's shares from trading on the Warsaw Stock Exchange's regulated market.

However, as of 30 June 2024, and as of the date of these consolidated financial statements issue the delisting process has not been completed.

The Group’s principal business activity is the production and subsequent export of sunflower oil and meal in bulk, the production and sale of bottled

sunflower oil, the wholesale trade of grain (mainly corn, soybean, wheat, and barley), farming, and the provision of logistics and transshipment

services. The majority of the Group’s manufacturing facilities are primarily based in Ukraine. As of 30 June 2024, the Group employed 10,904

people (10,733 people as of 30 June 2023).

The Group’s financial year runs from 1 July to 30 June.

The principal place of business of the Group is Ukraine. The principal operating office of the Group is located at 3 Tarasa Shevchenka Lane, Kyiv,

01001, Ukraine.

As of 30 June, the primary Subsidiaries of the Group and principal activities of the Subsidiaries consolidated by the Holding were as follows:

Group’s effective ownership

interest and voting rights as of

Subsidiary

Principal activity

Country of incorporation

30 June 2024

30 June 2023

Inerco Trade S.A.

Trading in sunflower oil,

meal and grain.

Switzerland

100.0%

Kernel-Trade LLC

Ukraine

100.0%

Avere Commodities SA

Switzerland

100.0%

Poltava OEP PJSC

Oilseed crushing plants. Production

of sunflower oil and meal.

Ukraine

99.7%

Bandurka OEP LLC

Ukraine

100.0%

Kropyvnytskyi OEP PJSC

Ukraine

99.2%

BSI LLC

Ukraine

100.0%

Prydniprovskyi OEP LLC

Ukraine

100.0%

Starokostiantynivskyi OEZ LLC

Ukraine

100.0%

Estron Corporation Ltd

Provision of grain, oil, and meal

handling and transshipment services

Cyprus

100.0%

Transbulkterminal LLC

Ukraine

100.0%

Transgrainterminal LLC

Ukraine

100.0%

Oilexportterminal LLC

Ukraine

100.0%

Poltava HPP PJSC

Grain elevators. Provision of grain

and oilseed cleaning, drying, and

storage services.

Ukraine

94.1%

Kononivsky Elevator LLC

Ukraine

100.0%

Agro Logistics Ukraine LLC

Ukraine

100.0%

Bilovodskyi KHP PJSC

Ukraine

91.12%

Hliborob LLC

Agricultural farms. Cultivation of ag-

ricultural products: corn, wheat, soy-

bean, sunflower seed, rapeseed, for-

age, pea and barley.

Ukraine

100.0%

Prydniprovskyi Kray ALLC

Ukraine

100.0%

Druzhba-Nova ALLC

Ukraine

100.0%

Druzhba 6 PE

Ukraine

100.0%

AF Semerenky LLC

Ukraine

100.0%

Hovtva ALLC

Ukraine

100.0%

These consolidated financial statements were authorized for release by the board of directors of Kernel Holding S.A. on 28 October 2024.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

2. Change in Issued Capital

Since 15 June 2005, the parent company of the Group is Kernel Holding S.A. (Luxembourg). The issued capital of the Holding as of 30 June 2024,

consisted of 293,429,230 ordinary electronic shares without indication of the nominal value (30 June 2023: 84,031,230). Ordinary shares have

equal voting rights and rights to receive dividends (except for own shares purchased).

The shares were distributed as follows:

As of 30 June 2024

As of 30 June 2023

Equity holders

Shares allotted

and fully paid

owned

Shares allotted

and fully paid

Owned

Namsen Limited registered under the legislation of Cyprus

276,914,889

94.37%

62,222,460

74.05%

Free float

16,514,341

5.63%

15,206,770

18.10%

Own shares purchased

—

6,602,000

7.85%

Total

293,429,230

100.00%

84,031,230

100.00%

As of 30 June 2024 and 30 June 2023, the Company’s immediate majority shareholder was Namsen Limited (‘Namsen Ltd') and the Company was

ultimately controlled by Mr. Andrii Verevskyi. As of 30 June 2024 and 2023, 100% of the beneficial interest in Namsen Ltd was held by Mr. An-

drii Verevskyi.

As of 1 September 2023, the Company increased its share capital by USD 5,704 thousand, through the issuance of 216,000,000 new Ordinary

Shares, each without indication of a nominal value. The total offering of USD 59,984 thousand was raised from qualified investors, with USD 54,280

thousand allocated to share premium.

On 21 March 2024, the Group decreased its share capital by USD 174 thousand through the cancellation of 6,602,000 shares held in treasury by

its wholly owned subsidiary with USD 96,723 thousand decrease allocated to share premium.

Luxembourg companies are required to allocate to a legal reserve a minimum of 5% of the annual net income until this reserve equals 10% of the

subscribed issued capital. This reserve, in the amount of USD 221 thousand as of 30 June 2024 and 2023, may not be distributed as dividends.

3. Operating Environment

On 24 February 2022, Russia launched a full-scale military invasion of Ukraine. As a response, Ukraine declared martial law which is still in place

as of the date of signing of these consolidated financial statements as the military actions are still ongoing in the Eastern and Southern parts of

Ukraine along the frontline, some towns and cities in these regions remain temporarily occupied while Russia conducts sporadic bombardments

throughout the whole Ukrainian territory.

The Ukrainian economy has features inherent in emerging markets, and its development is heavily influenced by the fiscal and monetary policies

adopted by the Ukrainian government, together with developments in the legal, regulatory, and political environment which changes rapidly.

According to the National Bank of Ukraine’s (‘NBU’) forecast, during the second half of the 2024 calendar year, the inflation will pick up to 8.5%,

but ease to 6.6% next year and go back to 5% target in the 2026 calendar year. Although the economic recovery will continue, its pace will slow to

3.7% this year, primarily due to significant damage to the energy system. In the next two years, real GDP growth will accelerate to 4% – 5%.

During August 2024, approximately USD 8.4 billion in external financing was received into the general fund of Ukraine's State Budget. Of this

amount, USD 5.5 billion were grants, and USD 2.9 billion were concessional loans. Thus, over 65% of the funds raised were received on a non-

repayable basis. Overall, in 2024, external financing reached USD 24.5 billion (including USD 6.6 billion in grants). The total assistance since the

beginning of the full-scale war amounts to USD 98 billion.

The ‘grain agreement’ between Ukraine, Turkey, and the United Nations was effective until 17 July 2023, when Russia has officially withdrawn

from the deal. In August 2023, a temporary sea corridor began to operate via Ukraine. In 2023, a total of 56.3 million tons of goods were exported

through Ukrainian ports (2022: 47.8 million tons). Starting from 17 July 2023, up until today, 2,300 ships have entered Ukraine's Black Sea ports

during the corresponding period of operation of the Black Sea maritime corridor, with a total cargo turnover of more than 64 million tons. Of this,

nearly 44 million tons of grain were exported from Ukraine via this corridor. This enabled Ukrainian exporters to increase the physical volume of

their sales by 35% in the first half of 2024 and to reach pre-war export levels.

As of 1 October 2024, Ukraine had USD 38,899 million in international reserves, early data show. In September 2024, they declined by 8.1%. Such

dynamics were driven by the NBU’s FX interventions to compensate for the structural deficit of foreign currency and smooth out exchange rate

fluctuations, as well as by Ukraine’s FX debt repayments. These transactions were partially offset by proceeds from the placement of FX domestic

government debt securities and inflows of international assistance in September, which were one of the smallest since the beginning of the year,

following the large inflows in August.

In accordance with the July 2024 NBU Inflation Report, external financing will enable Ukraine to maintain a sufficient level of international reserves.

By the end of 2024, they will have come close to USD 41 billion. Going forward, as international support expectedly declines, reserves will gradually

diminish to USD 37 billion in 2025 and USD 32 billion in 2026. However, they will be sufficient to preserve the sustainability of the FX market and

ensure moderate two-way fluctuations in the exchange rate as market conditions change.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

www.ker

nel.ua

The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Starting from 14 June 2024, the Board of the National Bank of Ukraine has decided to cut the key policy rate from 13.5% to 13.0%. Considering

the still moderate rate of inflation, ongoing improvement in inflation expectations, and the balance of risks for further inflation dynamics, the NBU

continues the cycle of interest rate policy easing in order to support economic recovery. Beginning on 19 September 2024, NBU has decided to

keep its key policy rate at 13% per annum.

In 2023 - 2024, Ukraine witnessed massive power outages for the population and businesses due to significant damage to power grids caused by

missile attacks and shelling from the Russian Federation, which also caused problems with water and heat supply. The Government introduced a

range of emergency measures to resolve those challenges and stabilize the economy. Effective from February 2023, the situation in the energy

system of Ukraine improved and stabilized. However, in May-September 2024 missile attacks on the Ukrainian energy system resumed which has

led to new outages.

As of October 2024, the war between Ukraine and the Russian Federation is ongoing, resulting in the significant destruction of property and assets

in Ukraine and other serious consequences. The consequences of the war are changing daily, and the long-term implications are unclear. Further

impact on the Ukrainian economy depends upon the way the Russian military invasion in Ukraine is resolved and upon the success of the Ukrainian

Government in the realization of new reforms, recovery strategy after the invasion is stopped, and the transformation of the state to acquire the

European Union membership, as well as cooperation with the international funds.

4. Summary of Material Accounting Policies

Basis of Preparation and Accounting

The consolidated financial statements of the Group have been prepared in accordance with IFRS Accounting Standards as adopted by the Euro-

pean Union.

The consolidated financial statements have been prepared under the historical cost convention, as modified by the revaluation of property, plant

and equipment for the oilseeds processing segment, biological assets, agricultural produce and certain financial assets and liabilities measured at

fair value. The consolidated financial statements have been prepared on a going concern basis.

The Group’s Subsidiaries maintain their accounting records in local currencies in accordance with the accounting and reporting regulations of the

countries of their incorporation. Local statutory accounting principles and procedures may differ from those generally accepted under IFRS Ac-

counting Standards. Accordingly, the consolidated financial statements, which have been prepared from the Group’s Subsidiaries’ accounts under

local accounting regulations, reflect adjustments necessary for such financial statements to be presented in accordance with IFRS Accounting

Standards.

Going concern

The Group`s operations continued to be significantly affected by the Russian full-scale military invasion of Ukraine on 24 February 2022, causing

widespread disruption within Ukraine and triggering economic, humanitarian, and environmental crises. Kernel Group's business activities have

been adjusted, focusing on continuity and safeguarding operations. The Group has assessed the war`s impact on its business, as follows:

• In 2024, Ukraine's grain exports underwent significant changes. Following the termination of the UN-brokered Black Sea Grain Initiative on

17 July 2023, Russia revoked its security guarantees for vessels navigating to Ukraine's deep-sea ports and commenced regular attacks target-

ing port and agricultural infrastructure, further destabilizing the region's ability to sustain export operations. In August 2023, the Ukrainian Navy

established a temporary corridor for commercial navigation; however, normal ship traffic did not fully resume until mid-October. Russian attacks

on civilian grain vessels continue to jeopardize Ukraine’s export capabilities, placing immense pressure on companies relying on Black Sea

routes. However, the temporary corridor has enabled a continuation of grain shipments throughout the 2024 financial year.

• Several of the Group's facilities, including 7 silos and 3 export terminals, have sustained significant damage from missile and drone attacks.

These assaults caused substantial harm to storage facilities, intake capacities, and loading equipment, with a net book value of lost property,

plant and equipment amounting to USD 11.2 million. Port railway infrastructure was attacked several times, causing logistics disruptions. The

Vovchansk oil extraction plant in the Kharkiv region previously operated by the Group is fully destroyed because of heavy battles in the town.

The Prykolotne oil extraction plant in the Kharkiv region also suffered severe damages as a result of the bombing and is currently inaccessible.

• The Group faces mobilization of employees to Ukraine`s military forces. Since the invasion, 1,764 employees have joined Ukraine’s military

forces or territorial defense, of which approximately 826 have been demobilized. Most personnel have returned to their pre-war positions.

• As of 2024, the war in Ukraine has displaced millions of its citizens both internally and across Europe. Approximately 6.8 million Ukrainians have

sought refuge in various European countries, with significant numbers being hosted in Poland, Germany, and the Czech Republic. Meanwhile,

within Ukraine, around 8 million people have been displaced from their homes, fleeing conflict zones for safer regions, particularly in the west of

the country. This mass displacement has created serious workforce shortages both inside and outside of Ukraine. As millions have left the

country, businesses, particularly in key sectors such as agriculture, logistics, and manufacturing, have faced challenges in finding personnel to

maintain normal operations. Skilled labor shortages are particularly acute, as many professionals and tradespeople were among those displaced

or are now serving in the military. The active conscription poses additional human capital risks for the Group.

• As of 30 June 2024, the Group classified its bank borrowings with long-term initial contractual maturity in the amount of USD 130,594 thousand

as short-term as the Group had waivers for technical and financial covenants for the period less than the final 12 months since the reporting

date.

• The Group is seeking alternative sources of financing, such as loans from European and Ukrainian banks that have committed to providing

financial support to businesses in Ukraine.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

100

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The management has undertaken a restructuring of the business processes in response to the impacts of the war:

• The Group achieved a total crushing volume of 3.2 million tons of oilseeds for the 2024 financial year, including 130 thousand tons of rapeseed.

This includes 188 thousand tons processed for third parties under tolling agreements. This represents a 24% year-over-year increase, primarily

driven by the additional crushing capacity introduced in February 2024 with the commissioning of a greenfield oil extraction plant in western

Ukraine. The performance in FY2025 will be supported by stable export operations through Black Sea ports. However, the Group anticipates the

largest-ever deficit of seeds in the country, which will intensify competition for feedstock and put downward pressure on margins

• The Group successfully increased product exports by 36% through the Black Sea ports and alternative routes, including Danube ports, rail, and

trucks, thanks to additional investments in logistics assets and the dedicated efforts of the team. The Group acquired a 50,000-ton capacity bulk

vessel, marking the third in Kernel's fleet. This addition enhanced the Group's logistics and export capacity.

• Grain procurement increased to 2.8 million tons on the back of stable export operations via Black Sea export routes for most of the year.

• As of 30 June 2024, the Group managed a land bank of 358 thousand hectares, with 95% of the land successfully planted. The Group has

completed the harvesting of all crops, except for corn, which is now in the final phase of harvesting.

• To ensure uninterrupted operations the Group continues to invest in power generators and during the year ended 30 June 2024 USD 2.4 million

were invested to support the electricity system (for the year ended 30 June 2023: USD 3.1 million).

• Since 2017, Kernel has been developing a biomass-based "green" energy project, achieving a combined turbine actual capacity of approximately

84.4 MW. In the context of the ongoing war, investing in this initiative has provided the Group with a reliable alternative energy source, reducing

its dependency on external supplies and enhancing resilience against disruptions caused by the conflict.

• As of 30 June 2024, the Group has outstanding loans totaling USD 315,166 thousand. During the 2024 financial year, short-term borrowings of

USD 790,455 thousand were repaid. Additionally, starting from December 2023, the Group resumed its regular repayment schedule with Euro-

pean banks, having fully repaid the previously outstanding principal to restore normal terms.

• After the reporting date the Group repaid USD 300,000,000 bonds (Note 24, 39) which were due 17 October 2024.

• The Group signed the new PXF agreement for financing of sunflower seeds purchase for USD 150,000 thousand which was arranged by Euro-

pean banks.

• Despite the disruptions caused by the war in Ukraine, as of 30 June 2024 the Group’s current assets exceeded current liabilities by USD 788,293

thousand, and the Group generated profit for the period of USD 167,628 thousand and operating cash flow of USD 472,136 thousand.

Considering the above, management has assessed the going concern assumption based on which the consolidated financial statements have

been prepared.

Management prepared cash flow forecasts for the next 12 months since the consolidated financial statements issue date. The following key as-

sumptions were made by management:

• No significant further advancement of Russian troops into the territory of Ukraine and no further escalation of military actions that could severely

impact the Group’s assets;

• Deep water ports in Ukraine will remain open and operational during the next financial year, enabling the Group to continue exports.

• Deferral of non-essential capital expenditures that are not contractually committed or critical to operations;

• The settlement of the 2024 bonds occurred in October 2024;

• The Group will be able to settle the bank borrowings and bonds until their initial maturity date;

• The Group expects to utilize available credit lines or secure new financing within the 2025 financial year.

Management acknowledges that the future development of military actions, and their duration represent a material uncertainty that may cast

significant doubt about the Group’s ability to continue as a going concern and, therefore, the Group may be unable to realize its assets and

discharge its liabilities in the normal course of business. Despite the material uncertainty relating to the war in Ukraine, management is continuing

to take actions to minimize the impact on the Group and thus believes that the application of the going concern assumption for the preparation of

these consolidated financial statements is appropriate.

Adoption of New and Revised Standards

The Group has adopted all new and revised IFRS Accounting Standards that became effective for annual periods beginning on or after 1 July

2023. The changes are as follows:

Amendments to IFRS 9, IFRS 17, IAS 1, IAS 8, IAS 12

IFRS 17 requires insurance liabilities to be measured at a current fulfillment value and provides a more uniform measurement and presentation

approach for all insurance contracts. These requirements are designed to achieve the goal of consistent, principle-based accounting for insurance

contracts.

Amendments to IFRS 17 addressed concerns and implementation challenges that were identified after IFRS 17 Insurance contracts were pub-

lished.

Classification of liabilities as current or non-current (Amendments to IAS 1): The amendments aim to promote consistency in applying the require-

ments by helping companies determine whether, in the statement of financial position, debt and other liabilities with an uncertain settlement date

should be classified as current (due on potentially due to be settled within one year) or non-current.

Disclosure of Accounting policies (Amendments to IAS 1): The amendments require that an entity discloses its material accounting policies instead

of its significant accounting policies.

Definition of accounting estimates (Amendments to IAS 8): The amendments replace the definition of a change in accounting estimates and clarify

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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for entities distinguishing changes in accounting estimates from accounting policies.

Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12): The amendments clarify that the initial

recognition exemption does not apply to transactions in which equal amounts of deductible and taxable temporary differences arise on initial

recognition.

Standards and Interpretations Issued but not Effective

At the date of authorization of these consolidated financial statements, the following standards, and interpretations, as well as amendments to the

standards had been issued but were not yet effective:

Standards and Interpretations

Effective for the annual period

beginning on or after

Lease liability in Sale and Leaseback (Amendments to IFRS 16)

1 January 2024

Supplier Finance Arrangements (Amendments to IAS 7 and IFRS 7)

1 January 2024

Non-current Liabilities with Covenants (Amendments to IAS 1)

1 January 2024

Lack of Foreign Currency Exchangeability (Amendments to IAS 21)

1 January 2025

Presentation and Disclosure in Financial Statements (Amendments to IFRS 18)

1 January 2027

Subsidiaries without Public Accountability: Disclosure (Amendments to IFRS 19)

1 January 2027

Management anticipates that the adoption of these standards and interpretations will not have a material effect on the consolidated financial

statements of the Group in future periods.

Functional and Presentation Currency

The Group’s presentation currency is the United States dollar (‘USD’). The functional currency of the majority of the Group’s foreign Subsidiaries

is their local currency, except for businesses engaged in the production and sale of sunflower oil and export terminals, for which USD was deter-

mined as the functional currency.

Foreign Currencies

Transactions in currencies other than the functional currencies of the Group`s companies are initially recorded at the rates of exchange prevailing

on the dates of the transactions. Subsequently, monetary assets and liabilities denominated in such currencies are translated at the rates prevailing

on the reporting date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing

at the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not

retranslated.

On consolidation, the assets and liabilities of the Subsidiaries are translated at exchange rates prevailing on the reporting date. Income and expense

items are translated at the average exchange rates for the period, unless the exchange rates fluctuate significantly during that period, in which

case the exchange rates at the dates of the transactions are used. Exchange differences arising, if any, are recognized in Consolidated Statement

of Profit or Loss and Other Comprehensive Income accumulated in ‘Translation reserve’.

The exchange rates during the period of the financial statements were as follows:

Currency

Closing rate as of

30 June 2024

Average rate for the

year ended 30 June 2024

Closing rate as of

30 June 2023

Average rate for the

year ended 30 June 2023

USD/UAH

40.5374

37.7892

36.5686

36.1678

USD/EUR

0.9348

0.9248

0.9228

0.9569

USD/PLN

4.0320

4.0582

4.1066

4.4814

Rates established by NBU might differ from the commercial rates. Therefore, these rates might not be the ones at which the assets could be

realized, or liabilities could be settled. Additionally, certain NBU restrictions on transactions with foreign currency continued in 2024 financial year

and until the date of these consolidated financial statements issue, although they were gradually eased during this period.

The average exchange rates for each period are calculated as the arithmetic mean of the exchange rates for all trading days during this period.

The sources of exchange rates are the official rates set by the National Bank of Ukraine for USD/UAH and by the National Bank of Poland for

USD/EUR and USD/PLN.

All foreign exchange gain or loss that occurs on revaluation of monetary balances, presented in foreign currencies, is allocated as a separate line

in the Consolidated Statement of Profit or Loss.

Basis of Consolidation

The consolidated financial statements incorporate the consolidated financial statements of the Holding and companies controlled by the Holding

(‘Subsidiaries’) as of 30 June 2024.

The consolidated financial statements incorporate the financial statements of the Company and entities (including structured entities) controlled by

the Company and its Subsidiaries. Control is achieved when the Company:

• has the power over the investee;

• is exposed, or has rights, to variable returns from its involvement with the investee; and

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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• has the ability to use its power to affect its returns.

The Company reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the

three elements of control listed above.

When the Company has less than a majority of the voting rights of an investee, it has power over the investee when the voting rights are sufficient

to give it the practical ability to direct the relevant activities of the investee unilaterally. The Company considers all relevant facts and circumstances

in assessing whether or not the Company’s voting rights in an investee are sufficient to give it power, including:

• the size of the Company’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;

• potential voting rights held by the Company, other vote holders, or other parties;

• rights arising from other contractual arrangements;

• any additional facts and circumstances that indicate that the Company has, or does not have, the current ability to direct the relevant activities

at the time that decisions need to be made, including voting patterns at previous shareholders’ meetings.

Consolidation of a Subsidiary begins when the Company obtains control over the Subsidiary and ceases when the Company loses control of the

Subsidiary. Specifically, income and expenses of a Subsidiary acquired or disposed of during the year are included in the Consolidated Statement

of Profit or Loss and Other Comprehensive Income from the date the Company gains control until the date when the Company ceases to control

the over Subsidiary.

All inter-company transactions and balances between the Group’s enterprises are eliminated for consolidation purposes. Unrealized gains and

losses resulting from inter-company transactions are also eliminated, except for unrealized losses that cannot be recovered.

Non-controlling interests in Subsidiaries are identified separately from the Group’s equity therein. Non-controlling interests as of the reporting date

represent the non-controlling equity holders’ portion of the fair values of the identifiable assets and liabilities of the Subsidiary at the acquisition

date and the non-controlling equity holders’ portion of movements in equity since the date of acquisition. Profit or loss and each component of the

other comprehensive income are attributed to the owners of the Company and to the non-controlling interests. The total comprehensive income of

Subsidiaries is attributed to the equity holders of the Company and to non-controlling interests even if this results in the non-controlling interests

having a deficit balance.

Business Combinations

Acquisitions of businesses are accounted for using the acquisition method. The consideration transferred in a business combination is measured

at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the Group, liabilities incurred by the

Group to the former owners of the acquire and equity interests issued by the Group in exchange for control of the acquire. Acquisition costs are

expensed when incurred and included in general, administrative and selling expenses.

At the acquisition date, identifiable assets acquired, and liabilities assumed are recognized at their fair value, except that:

• Deferred tax assets or liabilities and liabilities or assets related to employee benefit arrangements are recognized and measured in accordance

with IAS 12 Income Taxes and IAS 19 Employee Benefits, respectively;

• The Group shall recognize right-of-use assets and lease liabilities for leases identified in accordance with IFRS 16 in which the acquiree is the

lessee. The Group shall measure the lease liability at the present value of the remaining lease payments (as defined in IFRS 16) as if the

acquired lease were a new lease at the acquisition date. The Group shall measure the right-of-use asset at the same amount as the lease

liability, adjusted to reflect favorable or unfavorable terms of the lease when compared with the market;

• The acquirer shall measure the value of a reacquired right recognized as an intangible asset based on the remaining contractual term of the

related contract regardless of whether market participants would consider potential contractual renewals when measuring its fair value;

• Liabilities or equity instruments related to share-based payment arrangements of the acquire or share-based payment arrangements of the

Group entered into to replace share-based payment arrangements of the acquire are measured in accordance with IFRS 2 Share-based Payment

at the acquisition date; and

• Assets and liabilities that are classified as held for sale in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations

are measured in accordance with that standard.

For each business combination, the Group measures the non-controlling interests in the acquiree either at fair value or at a proportionate share of

the acquirer’s identifiable net assets. If the initial accounting for a business combination cannot be completed by the end of the reporting period in

which the combination occurs, only provisional amounts are reported, which can be adjusted during a measurement period of 12 months after the

acquisition date.

Changes in the Group’s ownership interests in Subsidiaries that do not result in the Group losing control over the Subsidiaries are accounted for

as equity transactions. The carrying amounts of the Group’s interests and non-controlling interests are adjusted to reflect changes in their relative

interests in Subsidiaries. Any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consider-

ation paid or received is recognized directly in equity and attributed to the equity holders of the Holding.

Goodwill

Goodwill arising from a business combination is recognized as an asset at the date that control is acquired (acquisition date). Goodwill is measured

as the excess of the sum of the consideration transferred, the amount of any non-controlling interest in the acquiree, and the fair value of the

acquirer’s previously held equity interest (if any) in the entity net of the acquisition date amounts of the identifiable assets acquired and the liabilities

assumed.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Goodwill is not amortized but it is tested for impairment annually, or more frequently if events or changes in circumstances indicate that it might be

impaired and is carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of

goodwill relating to the entity sold. If, after reassessment, the net of the acquisition date amounts of the identifiable assets acquired and liabilities

assumed exceeds the sum of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of the

acquirer’s previously held interest in the acquire (if any), the excess is recognized immediately in profit or loss as a bargain purchase gain.

For impairment testing, goodwill is allocated to each of the Group’s cash-generating units (or groups of cash-generating units) (‘CGU’) that are

expected to benefit from the synergies of the combination. The cash-generated units or groups of units are identified at the lowest level at which

goodwill is monitored for internal management purposes, being the legal entity, which represents a production site of the Group, except for the

Farming segment where the whole segment is determined as one CGU and two grain export terminals which represent a single CGU.

Non-current assets held for sale and Discontinued Operations

In compliance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, non-current assets and disposal groups are classified

as held for sale if their carrying amounts will be recovered principally through a sale transaction rather than through continuing use.

This condition is regarded as met only when the sale is highly probable within one year, and the asset or disposal group is available for immediate

sale in its present condition. Non-current assets are measured at the lower of the previous carrying amount or the fair value less costs to sell.

Events or circumstances may extend the period to complete the sale beyond one year. An extension of the period required to complete a sale does

not preclude an asset from being classified as held for sale if the delay is caused by events or circumstances beyond the Group’s control, and there

is sufficient evidence that the Group remains committed to its plan to sell the asset. In such circumstances, the asset is measured at its fair value

less costs to sell at each reporting date. Any impairment loss arising subsequent to reclassification as held for sale is recognized in the Consolidated

Statement of Profit or Loss. Non-current assets and liabilities of a disposal group classified as held for sale are presented separately from the other

assets and liabilities in the balance sheet.

Non-current assets are not depreciated or amortized while they are classified as held for sale.

If the criteria for classification of the asset as held for sale are no longer met at the reporting date, the Group ceases to classify the asset as held

for sale.

A discontinued operation is a component of the Group that either has been disposed of, or is classified as held for sale, and:

• Represents a separate major line of business or geographical area of operations;

• Is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or

• Is a Subsidiary acquired exclusively with a view to resale.

The result from discontinued operations is presented in the Consolidated Statement of Profit or Loss as a separate item after the profit from

continuing operations. If the criteria for classification of the disposal group held for sale are met after the reporting date, the disposal group is not

presented as held for sale in those consolidated financial statements when issued. However, when those criteria are met after the reporting date

but before the authorization of the consolidated financial statements for issue, the Group discloses the relevant information in the notes to the

consolidated financial statements.

Fair Value Measurement

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at

the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes

place either in the principal market for the asset or liability or in the absence of a principal market, in the most advantageous market for the asset

or liability. The principal or most advantageous market must be accessible to the Group.

The fair value of an asset or a liability is measured using the assumptions market participants would use when pricing the asset or liability, assuming

that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant’s ability to generate economic benefits by using the asset

in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use. The Group uses

valuation techniques that are appropriate in the circumstances and for which sufficient data is available to measure fair value, maximizing the use

of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the consolidated financial statements are categorized within the fair value

hierarchy, described as follows, based on the lowest level input that is significant to the fair value measurement as a whole:

• Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

• Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

• Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are recognized in the consolidated financial statements on a recurring basis, the Group determines whether transfers

have occurred between levels in the hierarchy by reassessing categorization (based on the lowest level input that is significant to the fair value

measurement as a whole) at the end of each reporting period.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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For the transactions and activities in financial instruments, the Group could conclude enforceable master netting or similar arrangements, each

agreement between the Group and the counterparty allows for net settlement of the relevant financial assets and liabilities when both elect to settle

on a net basis (Note 37). In the absence of such an election, financial assets and liabilities may be settled on a gross basis, however, each party

to the master netting or similar agreement will have the option to settle all such amounts on a net basis in the event of default of the other party.

Per the terms of each agreement, an event of default includes failure by a party to make payment when due, failure by a party to perform any

obligation required by the agreement (other than payment) if such failure is not remedied within periods of 30 to 60 days after notice of such failure

is given to the party or bankruptcy.

Inventories

Inventories are stated at a lower cost or net realizable value. Cost comprises direct materials and, where applicable, direct labor costs and those

overheads that have been incurred in bringing the inventories to their present location and condition. Cost is calculated using the first-in, first-out

(FIFO) method. Net realizable value is the estimated selling price in the ordinary course of business less the estimated costs of completion and the

estimated costs necessary to make the sale.

Biological Assets and Agricultural Produce

The Group classifies crops in fields and cattle as biological assets.

Biological assets are stated at fair value less estimated costs to sell at both initial recognition and as of the reporting date, with any resulting gain

or loss recognized in the Consolidated Statement of Profit or Loss. Costs of selling include all costs that would be necessary to sell the assets,

including costs necessary to get the assets to market.

Agricultural produce harvested from biological assets is measured at its fair value less costs to sell estimated at the point of harvest. A gain or loss

arising from the initial recognition of agricultural produce at fair value less costs to sell is included in the Consolidated Statement of Profit or Loss.

The Group presents gain/(loss) on revaluation attributable to the agricultural produce sold during the year in the line Net change in fair value of

biological assets and agricultural produce.

Biological assets for which quoted market prices are not available are measured using the present value of expected net cash flows from the sale

of an asset discounted at a current market-determined rate. The objective of a calculation of the present value of expected net cash flows is to

determine the fair value of a biological asset in its present location and condition.

Cost of agricultural preparation of fields before seeding is recorded as work-in-progress in inventories. After seeding, the cost of field preparation

is recognized as biological assets held at fair value less costs to sell.

The Group classifies biological assets as current or non-current depending upon the average useful life of the group of biological assets. All of the

Group’s biological assets except non-current cattle were classified as current, as their average useful life is less than one year.

Property, Plant, and Equipment

Buildings, constructions, production machinery and equipment (Oilseed Processing segment) are accounted for at revalued amounts, being the

fair value, which is determined using external professional expert evaluation. Revaluations are performed with sufficient regularity such that the

carrying amount does not differ materially from that which would be determined using fair values at the reporting date. Any accumulated deprecia-

tion at the date of revaluation is eliminated against the gross carrying amount of the asset, and the net amount is restated to the revalued amount

of the asset.

If the asset’s carrying amount is increased as a result of a revaluation, the increase is credited directly to other comprehensive income and accu-

mulated in the revaluation reserve in equity. However, such an increase is recognized in the Consolidated Statement of Profit or Loss to the extent

that it reverses an impairment of the same asset previously recognized in the Consolidated Statement of Profit or Loss. If the asset’s carrying

amount is decreased as a result of a revaluation, the decrease is recognized in the Consolidated Statement of Profit or Loss. However, such a

decrease is debited directly to the Other Comprehensive Income or Loss to the extent of any credit balance existing in the revaluation surplus with

respect to that asset.

Depreciation on revalued assets is charged to the Consolidated Statement of Profit or Loss. On the subsequent sale or retirement of revalued

assets, the revaluation surplus remaining in the revaluation reserve is transferred directly to retained earnings. No transfer is made from the

revaluation reserve to retained earnings except when an asset is derecognized. Property, plant and equipment are depreciated over the estimated

useful economic lives of assets under the straight-line method.

Useful lives of property, plant, and equipment are as follows:

Buildings and constructions

20 - 50 years

Production machinery and equipment

10 - 20 years

Agricultural equipment and vehicles

5 - 30 years

Other fixed assets

5 - 20 years

Construction in progress (CIP) and uninstalled equipment

not depreciated

Except for land, building and constructions and production machinery and equipment of the Oilseed Processing segment, all other property, plant

and equipment is stated at historical cost less accumulated depreciation and accumulated impairment losses. Land is carried at cost less accumu-

lated impairment losses and is not depreciated.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Capitalized costs include major expenditures for improvements and replacements that extend the useful lives of assets or increase their revenue-

generating capacity. Repairs and maintenance expenditures that do not meet the foregoing criteria for capitalization are presented in the Consoli-

dated Statement of Profit or Loss as incurred.

Construction in progress consists of costs directly related to the construction of property, plant and equipment including an appropriate allocation

of directly attributable variable overhead incurred during construction. Depreciation of these assets commences when the assets are put into

operation.

An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected to arise from the

continued use of the asset. Any gain or loss arising from the disposal or retirement of an item of property, plant and equipment is determined as

the difference between the sales proceeds and the carrying amount of the asset and is recognized in the Consolidated Statement of Profit or Loss.

Leases

The Group assesses whether a contract is, or contains, a lease at the inception of the contract. The Group recognizes right-of-use assets and

corresponding lease liabilities with respect to all lease arrangements in which it is the lessee, except for short-term leases (defined as leases with

a lease term of 12 months or less).

For the short-term leases, the Group recognizes the lease payments as an operating expense on a straight-line basis over the term of the lease

unless another systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted by using

the incremental borrowing rate. The incremental borrowing rate is determined as reference interest rates which were derived from the yields of

corporate bonds in the currency similar to the lease contracts, for a period of up to 10 years.

Lease payments included in the measurement of the lease liability comprise:

• Fixed lease payments (including in-substance fixed payments), less any lease incentives receivable:

• Variable lease payments that depend on an index or rate, initially measured using the index or rate at the commencement date;

• The amount expected to be payable by the lessee under residual value guarantees.

• The exercise price of purchase options, if the lessee is reasonably certain to exercise the options; and

• Payments of penalties for terminating the lease, if the lease term reflects the exercise of an option to terminate the lease.

• The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the

case for leases of the Group, the Group’s incremental borrowing rate is used, being the rate that the Group would have to pay to borrow the

funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, collateral, and

conditions.

• To determine the incremental borrowing rate, the Group:

− where possible, uses recent third-party financing received by the Group as a starting point, adjusted to reflect changes in financing conditions

since third party financing was received,

− uses a build-up approach that starts with a risk-free interest rate adjusted for credit risk, and

− adjusts specific to the lease, e.g., term, country, currency, and collateral

The Group remeasures the lease liability (and makes a corresponding adjustment to the related right-of-use asset) whenever:

• The lease term has changed or there is a significant event or change in circumstances resulting in a change in the assessment of exercise of a

purchase option, in which case the lease liability is remeasured by discounting the revised lease payments using a revised discount rate.

• The lease payments change due to changes in an index or rate or a change in expected payment under a guaranteed residual value, in which

cases the lease liability is remeasured by discounting the revised lease payments using an unchanged discount rate (unless the lease payments

change is due to a change in a floating interest rate, in which case a revised discount rate is used).

• A lease contract is modified, and the lease modification is not accounted for as a separate lease, in which case the lease liability is remeasured

based on the lease term of the modified lease by discounting the revised lease payments using a revised discount rate at the effective date of

the modification.

The right-of-use assets comprise the initial measurement of the corresponding lease liability, lease payments made at or before the commencement

day, any lease incentives received, and any initial direct costs. Right-of-use assets are depreciated on a straight-line basis from the commencement

date of the lease.

The commencement date is the date on which a lessor makes an underlying asset available for use by a lessee.

The right-of-use assets and lease liabilities are presented as separate lines in the consolidated statement of financial position.

Finance costs, which represent the difference between the total lease payments included in the measurement of the lease liability and the initial

amount of the lease liability, are charged to profit or loss over the term of the relevant lease so as to produce a constant periodic rate of charge on

the remaining balance of the obligations for each accounting period.

Intangible Assets

Intangible assets with finite useful lives that are acquired separately are carried at cost less accumulated depreciation and accumulated impairment

losses. Amortization is primarily recognized within “Cost of Sales” on a straight-line basis over their estimated useful lives. The amortization method

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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and estimated useful life are reviewed annually with the effect of any changes in estimate being accounted for on a prospective basis. Intangible

assets with indefinite useful lives that are acquired separately shall not be amortized and are carried at cost less accumulated impairment loss.

Trademarks

The ‘Schedry Dar’, Stozhar’, ‘Zolota’ and ‘Domashnya’ are separately acquired trademarks that have indefinite useful lives and are not amortized

but tested for impairment by comparing their recoverable amount with their carrying amount annually on 30 June and whenever there is an indication

that the trademarks may be impaired.

Crypto Assets

The following inherent characteristics are considered to classify crypto assets as intangible assets:

• Assets are identifiable;

• Assets have a lack of physical substance;

• Group has control over the resource; and

• Future economic benefits exist.

The crypto assets are carried initially at a cost comprised of purchase price and transaction costs. The Group considers that the crypto assets do

not have a foreseeable limit to the period over which it is expected to generate net cash inflows for the Group, as a result, no amortization is

required. The Group applies the cost model: crypto assets are measured at cost on initial recognition and are subsequently measured at cost less

impairment losses, if any.

Impairment of tangible and intangible assets, except Goodwill

On each reporting date, the Group reviews the carrying amounts of the Group’s non-current assets to determine whether there is any indication

that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the assets is estimated in order to

determine the extent of the impairment loss (if any). Where it is not possible to estimate the recoverable amount of an individual asset, the Group

estimates the recoverable amount of the cash-generating unit to which the asset belongs.

The recoverable amount is the higher of fair value less costs to sell and value in use. In assessing value in use, the estimated future cash flows

are discounted to their present value using a discount rate that reflects current market assessments of the time value of money and the risks

specific to the asset for which the estimates of future cash flows have not been adjusted.

If the recoverable amount of an asset (or cash-generating unit) is estimated to be less than it is carrying amount, the carrying amount of the asset

(or cash-generating unit) is reduced to its recoverable amount. The cash generating unit represents the lowest level within the Group at which the

goodwill is monitored by management and which is not larger than a segment. An impairment loss is recognized immediately in the Consolidated

Statement of Profit or Loss, unless the relevant asset is carried at a revalued amount, in which case the impairment loss is treated as a revaluation

decrease.

Where an impairment loss subsequently reverses, the carrying amount of the asset (or a cash-generating unit) is increased to the revised estimate

of its recoverable amount to the extent that the increased carrying amount does not exceed the carrying amount that would have been determined

had no impairment loss been recognized for the asset (or cash-generating unit) in prior years. A reversal of an impairment loss is recognized

immediately in the Consolidated Statement of Profit or Loss, unless the relevant asset is carried at a revalued amount, in which case the reversal

of the impairment loss is treated as a revaluation increase.

Cash and cash equivalents

Cash and cash equivalents include cash in hand, and deposits held with banks with original maturities of three months or less. Cash and cash

equivalents are carried at amortized cost because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI,

and (ii) they are not designated at FVTPL. Restricted balances are excluded from cash and cash equivalents for the consolidated statement of

cash flows.

Financial Instruments

Financial assets and financial liability are recognized in the Group’s Consolidated Statement of Financial Position when, and only when, the Group

entity becomes a party to the contractual provisions of the instrument.

Financial assets are classified into the following categories financial assets at amortized cost, at fair value through other comprehensive income

(FVTOCI) or at fair value through profit or loss (FVTPL). The classification depends on the business model and contractual cash flow characteristics

of the financial assets or financial liabilities and is determined at the time of initial recognition.

The Group measures derivative instruments and investments made in debt instruments at FVTPL, all other financial instruments are measured at

amortized cost.

Financial assets and financial liabilities are initially measured at fair value, except for trade receivables and trade payables that do not have a

significant financing component which are measured at transaction price. All recognized financial assets are measured subsequently in their entirety

at either amortized cost or fair value, depending on the classification of the financial assets. All financial liabilities are measured subsequently at

amortized cost using the effective interest method or at FVTPL. Transaction costs that are directly attributable to the acquisition or issue of financial

assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from

the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in profit or loss.

Amortized cost and effective interest method

The Group measures financial assets at amortized cost if both of the following conditions are met:

• The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows; and

• The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the

principal amount outstanding.

Financial assets at amortized cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses

are recognized in profit or loss when the asset is derecognized, modified or impaired.

The effective interest method calculates the amortized cost of a debt instrument and allocates interest income over the relevant period. The effective

interest rate is the rate that exactly discounts estimated future cash receipts (including all fees and points paid or received that form an integral part

of the effective interest rate, transaction costs and other premiums or discounts) through the expected life of the debt instrument, or, where appro-

priate, a shorter period, to the net carrying amount on initial recognition.

Interest income is recognized on an effective interest basis for debt instruments other than those financial assets classified as at fair value through

profit or loss. The effect of initial recognition of financial assets and liabilities obtained/incurred at terms below the market is recognized net of the

tax effect as an income or expense, except for financial assets and liabilities with shareholders or entities under control of the Beneficial Owner,

whereby the effect is recognized through equity.

Financial assets at FVTPL

Financial assets that do not meet the criteria for being measured at amortized cost or FVTOCI are measured at FVTPL. Specifically:

• Investments in equity instruments are classified as at FVTPL, unless the Group designates an equity investment that is neither held for trading

nor a contingent consideration arising from a business combination as at FVTOCI on initial recognition;

• Debt instruments that do not meet the amortized cost criteria or the FVTOCI criteria are classified as at FVTPL. In addition, debt instruments

that meet either the amortized cost criteria or the FVTOCI criteria may be designated as at FVTPL upon initial recognition if such designation

eliminates or significantly reduces a measurement or recognition inconsistency (so called ‘accounting mismatch’) that would arise from measuring

assets or liabilities or recognizing the gains and losses on them on different bases. The Group has not designated any debt instruments as at

FVTPL. Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any fair value gains or losses recognized

in profit or loss to the extent they are not part of a designated hedging relationship. The net gain or loss recognized in profit or loss includes any

dividend or interest earned on the financial asset.

Derecognition of financial assets

The Group derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or when it transfers the financial

asset and all the risks and rewards to another entity. If the Group neither transfers nor retains substantially all the risks and rewards of ownership

and continues to control the transferred asset, the Group recognizes its retained interest in the asset and associated liability for amounts it may

have to pay. If the Group retains substantially all the risks and rewards of ownership of a transferred financial asset, the Group continues to

recognize the financial asset and also recognizes collateralized borrowing for the proceeds received.

On derecognition of a financial asset other than in its entirety (e.g. when the Group retains an option to repurchase part of a transferred asset or

retains a residual interest that does not result in the retention of substantially all the risks and rewards of ownership and the Group retains control),

the Group allocates the previous carrying amount of the financial asset between the part it continues to recognize under continuing involvement,

and the part it no longer recognizes based on of the relative fair values of those parts on the date of the transfer. The difference between the

carrying amount allocated to the part that is no longer recognized and the sum of the consideration received for the part no longer recognized and

any cumulative gain or loss allocated to it that had been recognized in other comprehensive income is recognized in the Consolidated Statement

of Profit or Loss. A cumulative gain or loss that had been recognized in other comprehensive income is allocated between the part that continues

to be recognized and the part that is no longer recognized based on the relative fair values of those parts.

Impairment of financial assets

The Group recognizes a loss allowance for expected credit losses (ECL) on a financial asset, other than those at FVTPL, at the end of each

reporting period. The amount of ECL and other current assets is updated at each reporting date to reflect changes in credit risk since the initial

recognition of the respective financial instrument.

The Group applies a simplified approach permitted by IFRS Accounting Standards to measuring ECL which uses a lifetime expected loss allowance

for trade receivables. The ECL on trade receivables and other current assets is estimated using a provision matrix, based on historical credit loss

experience and credit rating of customers, adjusted on observable and reasonable information.

Lifetime ECL represents the expected credit losses that will result from all possible default events over the expected life of a financial instrument.

In contrast, 12-month ECL represents the portion of lifetime ECL that is expected to result from default events on a financial instrument that are

possible within 12-months after the reporting date.

The Group writes off a financial asset when there is information indicating that the debtor is in severe financial difficulty and there is no realistic

prospect of recovery, e.g. when the debtor has been placed under liquidation or has entered bankruptcy proceedings, or in the case of trade

accounts receivable, when the amounts are over three years past due, whichever occurs sooner. Financial assets written off may still be subject

to enforcement activities under the Group’s recovery procedures, considering legal advice where appropriate. Any recoveries made are recognized

in profit or loss.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Definition of default

The Group considers the following as constituting an event of default for internal credit risk management purposes as historical experience indicates

that financial assets that meet either of the following criteria are generally not recoverable:

• when there is a breach of financial covenants by the debtor; or

• information developed internally or obtained from external sources indicates that the debtor is unlikely to pay its creditors, including the Group,

in full (without taking into account any collateral held by the Group).

Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more than 90 days past due unless the

Group has reasonable and supportable information to demonstrate that a more lagging default criterion is more appropriate.

Financial liabilities measured subsequently at amortized cost

Financial liabilities that are not (i) contingent consideration of an acquirer in a business combination, (ii) held‑for‑trading, or (iii) designated as at

FVTPL, are measured subsequently at amortized cost using the effective interest method.

Financial liabilities at FVTPL

Financial liabilities are classified as at FVTPL when the financial liability is (i) contingent consideration of an acquirer in a business combination, (ii)

held for trading or (iii) it is designated as at FVTPL.

A financial liability is classified as held for trading if:

• it has been acquired principally for the purpose of repurchasing it in the near term; or

• on initial recognition it is part of a portfolio of identified financial instruments that the Group manages together and has a recent actual pattern of

short‑term profit‑taking; or

• it is a derivative, except for a derivative that is a financial guarantee contract or a designated and effective hedging instrument.

A financial liability other than a financial liability held for trading or contingent consideration of an acquirer in a business combination may be

designated as at FVTPL upon initial recognition if:

• such designation eliminates or significantly reduces a measurement or recognition inconsistency that would otherwise arise; or

• the financial liability forms part of a group of financial assets or financial liabilities or both, which is managed, and its performance is evaluated

on a fair value basis, in accordance with the Group’s documented risk management or investment strategy, and information about the grouping

is provided internally on that basis; or

• it forms part of a contract containing one or more embedded derivatives, and IFRS 9 permits the entire combined contract to be designated as

at FVTPL.

Financial liabilities at FVTPL are measured at fair value, with any gains or losses arising on changes in fair value recognized in profit or loss to the

extent that they are not part of a designated hedging relationship. The net gain or loss recognized in profit or loss incorporates any interest paid on

financial liability.

However, for financial liabilities that are designated as at FVTPL, the amount of change in the fair value of the financial liability that is attributable

to changes in the credit risk of that liability is recognized in other comprehensive income, unless the recognition of the effects of changes in the

liability’s credit risk in other comprehensive income would create or enlarge an accounting mismatch in profit or loss. The remaining amount of

change in the fair value of liability is recognized in profit or loss. Changes in fair value attributable to a financial liability’s credit risk that is recognized

in other comprehensive income are not subsequently reclassified to profit or loss; instead, they are transferred to retained earnings upon derecog-

nition of the financial liability.

Derecognition of financial liabilities

The Group derecognizes financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have expired. The difference

between the carrying amount of the financial liability derecognized and the consideration paid and payable is recognized in profit or loss.

When the Group exchanges with the existing lender one debt instrument into another one with the substantially different terms, such exchange is

accounted for as an extinguishment of the original financial liability and the recognition of a new financial liability. Similarly, the Group accounts for

substantial modification of terms of an existing liability or part of it as an extinguishment of the original financial liability and the recognition of a new

liability. It is assumed that the terms are substantially different if the discounted present value of the cash flows under the new terms, including any

fees paid net of any fees received and discounted using the original effective rate is at least 10 per cent different from the discounted present value

of the remaining cash flows of the original financial liability. If the modification is not substantial, the difference between:

1. the carrying amount of the liability before the modification; and

2. the present value of the cash flows after modification should be recognized in the statement profit or loss as the modification gain or loss within

other operating income and expenses.

Derivatives and hedging activities

The Group enters a variety of derivative financial instruments including futures, options, and physical contracts to buy or sell commodities, that do

not meet the own use exemption. Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subse-

quently remeasured at their fair value at each reporting period. The resulting gain or loss is recognized immediately in the profit or loss within Cost

of sales (for the derivative purchase contracts) or Revenue (for settled forward sales contracts) unless the derivative is designated and effective

hedging instrument, in which case the timing of the recognition in profit or loss depends on the nature of the hedge relationship. Fair values are

determined using quoted market prices, broker quotations, or using models and other valuation techniques. Derivatives expected to be settled

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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within a year after the end of the reporting period are classified as current liabilities or current assets.

The Group utilizes derivatives to hedge market risk exposures related to commodity price movements in relation to its sales. Those derivatives

qualifying and designated as cash flow hedge of the exposure to variability in cash flows that is attributable to a risk or a highly probable forecast

sale transaction. The gains and losses, the effective portion of changes in the fair value of derivatives are recognized in the cash flow hedging

reserve within equity, limited to the cumulative change in fair value of the hedged item on a present value basis from the inception of the hedge

and recycled to profit or loss as the hedged transaction occurs. Amounts deferred in equity are transferred to the statement of profit or loss and

classified as income or expense in the same periods during which the cash flows, such as hedged highly probable sales, affect the statement of

profit or loss. Derivatives that do not qualify for hedge accounting have a gain or loss recognized in the income statement at the time of the

transaction.

Hedge effectiveness is determined at the inception of the hedge relationship, and through periodic prospective effectiveness assessments to ensure

that an economic relationship exists between the hedged item and hedging instrument. The effective portion of changes in the fair value of deriva-

tives and other qualifying hedging instruments that are designated and qualify as cash flow hedges are recognized in other comprehensive income

and accumulated under the heading of cash flow hedging reserve, limited to the cumulative change in fair value of the hedged item from inception

of the hedge. The gain or loss relating to the ineffective portion is recognized immediately in profit or loss and is included in the Revenue line.

When a hedging instrument expires, or is sold or terminated, or when a hedge no longer meets the criteria for hedge accounting, any cumulative

deferred gain or loss and deferred costs of hedging in equity at that time remains in equity until the forecast transaction occurs. When the forecast

transaction is no longer expected to occur, the cumulative gain or loss and deferred costs of hedging that were reported in equity are immediately

reclassified to profit or loss.

Share-based payments

Equity-settled share-based payments with employees are measured by reference to the fair value at the grant date and are recognized as an

expense over the vesting period, which ends on the date the relevant employees become fully entitled to the award.

Fair value is calculated using the Monte Carlo Simulation model. No expense is recognized for awards that do not ultimately vest.

At each reporting date before vesting, the cumulative expense is calculated representing the extent to which the vesting period has expired and

management’s best estimate of the achievement or otherwise of non-market conditions and of the number of equity instruments that will ultimately

vest. The movement in cumulative expense from the previous reporting date is recognized in the Consolidated Statement of Profit or Loss, with a

corresponding entry in equity.

For cash-settled share-based payments, a liability is recognized for the goods or services acquired, measured initially at the fair value of the liability.

At each reporting date until the liability is settled, and at the date of settlement, the fair value of the liability is remeasured, with any changes in fair

value recognized in profit or loss for the year.

Treasury shares

Own equity instruments held by the Group (‘Treasury shares') shall be deducted from equity. No gain or loss shall be recognized in profit or loss

on the purchase, sale, issue, or cancellation of the Group’s own equity instruments. These treasury shares may be acquired and held by the entity

or by other members of the Group. Any difference between the carrying amount and the consideration, if reissued, will be recognized in the share

premium reserve.

Provisions

A provision is recognized in the Consolidated Statement of Financial Position when the Group has a legal or constructive obligation because of a

past event, and it is probable that an outflow of economic benefits will be required to settle the obligation, and a reliable estimate of the obligation

amount can be made. The amount recognized as a provision is the best estimate of the consideration required to settle the present obligation at

the reporting date, considering the risks and uncertainties surrounding the obligation.

Revenue recognition

Revenue is derived principally from the sale of goods and finished products, farming and rendering services. Revenue from contracts with custom-

ers is recognized when control of the goods or services is transferred to the customer at an amount that reflects the consideration to which the

Group expects to be entitled in exchange for those goods or services.

The point of revenue recognition for sale of commodity goods is dependent upon contract sales terms (Incoterms). When goods are sold on a Cost

and freight (CFR) or Cost, insurance, and freight (CIF) basis, the Group is responsible for providing services such as carriage and freight to the

customer. The Group recognizes revenue from each separate performance obligation and allocates part of the transaction price to carriage and

freight services incorporated in some contracts that the Group undertakes to perform. The Group allocates the transaction price based on the

relative stand-alone selling prices of the commodities and supporting services. The revenue from these carriage and fright services is recognized

over time.

A receivable is recognized by the Group when the control over goods is transferred to the wholesaler as this represents the point of time at which

the right to consideration becomes unconditional, as only the passage of time is required before payment is due. The timing of billing is generally

close to the timing of performance obligation satisfaction, respectively, the amount of contract assets and contract liabilities is not material. When

the Group obtains a contract from a customer, the Group enters into a contract with one of those service providers, directing the service provider

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

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to render freight and other services for the customer. The Group is obliged to pay the service provider even if the customer fails to pay.

Rendering of Services

Revenue is recognized over time for services provided by the Group. The main type of services provided by the Group a crop cleaning, drying and

storage services by the Group’s silos. Revenue from grain cleaning, drying and storage services is recognized on an accrual basis, based on the

fees for the specific service, volumes of crops under service and days of storage.

Employee benefits

Wages, salaries, contributions to the pension and social insurance funds, paid annual leave and sick leave, bonuses, and non-monetary benefits

are accrued in the year in which the associated services are rendered by the employees of the Group. The Group recognizes a liability and an

expense for short-term bonuses and other short-term profit-sharing arrangements when the reporting entity has a present legal or constructive

obligation to make payments as a result of past events and a reliable estimate can be made of the amount payable.

Share-based options

The Group recognizes a compound financial instrument if an entity has granted the counterparty the right to choose whether a share-based payment

transaction is settled in cash or by issuing equity instruments, which includes a debt component (i.e. the counterparty’s right to demand payment

in cash) and an equity component (i.e. the counterparty’s right to demand settlement in equity instruments rather than in cash). The Group measures

the debt component of the compound financial instrument first and then measures the fair value of the equity component—considering that the

counterparty must forfeit the right to receive cash in order to receive the equity instrument. The fair value of the compound financial instrument is

determined as the sum of the fair values of the two components.

Borrowing Costs

Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets that necessarily take a

substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until the assets are substantially ready

for their intended use or sale.

All other borrowing costs are recognized in the Consolidated Statement of Profit or Loss in the period in which they are incurred.

Taxation

Income taxes have been provided for in the consolidated financial statements in accordance with legislation currently enacted in the legal jurisdic-

tions where the operating entities are located. Income tax expense represents the sum of the tax currently payable and deferred tax expense.

Current and deferred tax for the year

Current and deferred tax are recognized in the Consolidated Statement of Profit or Loss, except when they relate to items that are recognized in

other comprehensive income or directly in equity, in which case, the current and deferred tax are also recognized in other comprehensive income

or directly in equity, respectively. Where current tax or deferred tax arises from the initial accounting for a business combination, the tax effect is

included in the accounting for the business combination.

Current tax

The current income tax charge is the amount expected to be paid to, or recovered from, taxation authorities with respect to taxable profit or losses

for the current or previous periods. It is calculated using tax rates that have been enacted or substantially enacted by the reporting date in the

countries where the Holding and its Subsidiaries operate and generate taxable income. Taxable profit differs from ‘profit before tax’ because of

items of income or expense that are taxable or deductible in other years and items that are never taxable or deductible taxes other than income

tax are recorded within operating expenses. Some of the Group’s companies that are involved in agricultural production are exempt from income

taxes and pay the Unified Agricultural Tax instead.

Deferred tax

Deferred income tax is recognized on temporary differences arising between the carrying amount of assets and liabilities in the financial statements

and their corresponding tax bases used in the computation of taxable profit. Deferred tax balances are measured at tax rates enacted or substan-

tively enacted at the end of the reporting period that are expected to apply to the period when the temporary differences will reverse, or the tax loss

carried forward will be utilized. Deferred tax assets for deductible temporary differences and tax losses carried forward are recorded only to the

extent that it is probable that future taxable profit will be available against which the deductions can be utilized.

The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable

that sufficient taxable profits will be available to allow all or part of the assets to be recovered.

Deferred tax liabilities for taxable temporary differences associated with investments in Subsidiaries and joint ventures are recognized, except

when the Group is able to control the reversal of the temporary difference, and it is probable that the temporary difference will not reverse in the

foreseeable future. In addition, a deferred tax liability is not recognized if the temporary difference arises from the initial recognition of goodwill.

Deferred tax assets and liabilities are offset when:

• The Group has a legally enforceable right to set off the recognized amounts of current tax assets and current tax liabilities;

• The Group has the intention to settle on a net basis, or to realize the asset and settle the liability simultaneously;

• The deferred tax assets and the deferred tax liabilities relate to income taxes levied by the same taxation authority in each future period in which

significant amounts of deferred tax liabilities and assets are expected to be settled or recovered.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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5. Critical Accounting Judgments and Key Sources of Estimation Uncertainty

The application of IFRS Accounting Standards requires management to make reasonable judgments, assumptions and estimates. These estimates

and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the

consolidated financial statements. The estimates are based on the information available as of the reporting date. Actual results could differ from

these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognized in the period in

which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both

current and future periods.

Critical Judgments in Applying Accounting Policies

The following are the critical judgments, apart from those involving estimations (see below), that management has made in the process of applying

the Group’s accounting policies and that have the most significant effect on the amounts recognized in the consolidated financial statements.

Revaluation of Property, Plant and Equipment

The Group recognizes the buildings, constructions, production machinery, and equipment used in the Oilseed Processing segment at the fair value,

and assesses the carrying amount of items of property, plant, and equipment through the revaluation model to determine whether the carrying

amount differs materially from fair value. All other classes of property, plant and equipment are recognized at historical cost less depreciation and

impairment, if any.

The most recent valuation of the Group’s buildings, constructions, production machinery and equipment used in the Oilseed Processing segment

was performed as of 30 June 2022 by an independent appraiser following International Valuation Standards. Some machinery and equipment were

valued using the market approach, which is within level 3 of the fair value hierarchy. Other items of buildings, constructions, machinery, and

equipment were valued using the depreciated replacement cost approach, which is within level 3 of the fair value hierarchy. The results of the

depreciated replacement cost and market approach were then compared with the results of the income approach (Level 3 of unobservable inputs)

for corresponding assets to test whether impairment exists.

As of 30 June 2024, the Group analyzed whether the fair value of categories of property, plant, and equipment accounted for at fair value may

differ from their carrying amounts and involved an external independent appraiser to conclude that the fair value of these fixed assets will not be

significantly different from their book values other than those, for which impairment loss was recognized, as disclosed in Note 15.

Key sources of estimation uncertainty

The following are the key assumptions concerning the future, and other key sources of estimating uncertainty at the end of the reporting period,

that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.

Impairment of Property, Plant and Equipment

The Group performs impairment testing of non-financial assets whenever there is an indicator those assets might be impaired.

When there is an indication of impairment or a potential reversal of impairment concerning the Group’s non-current assets, management conducts

a thorough impairment review.

Management makes significant assumptions about factors which influenced due to the full-scale Russian invasion of Ukraine caused the following

events which might indicate impairment:

• temporary breakouts of the operations;

• breaches of supply/purchase contracts;

• limitation of a market for product delivery;

• limitation of export routes;

• decline in profitability and physical damage as a result of the invasion; and

• commodity prices, considering future price and trends, where the typical deviation in 5-10 % is common in the industry.

As a result of the adverse events, the Group tested non-current assets for recoverability by comparing the net carrying value of the assets and their

recoverable amount (higher in their value in use or fair value less cost to sell).

The Group performed the impairment test at the CGU level, for all CGUs of all segments, covering property, plant and equipment, intangible assets,

right-of-use assets and goodwill. The recoverable amount of each CGU was determined based on the higher amount of value-in-use and fair value

less costs to sell. In the case of impairment, the Group firstly allocates impairment to goodwill, then proportionally other intangible assets, property,

plant and equipment and rights of use the assets.

In assessing for impairment, assets that do not generate independent cash flows are allocated to the appropriate cash-generating unit.

The Group determines the recoverable amount to be value in use that is based on estimated future cash flows that are discounted to their present

value by applying the appropriate discount rate. Estimated future cash flows require management to make several assumptions that are disclosed

in Note 15. Cash flow forecasts used in the value-in-use approach were based on financial budgets approved by management covering five years

and extrapolated using the estimated growth rates for periods over 5 years.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

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The discount rate reflects the specific risks relating to the relevant segments and their functional currency and the country in which they operate.

The discount rate and key assumptions used in the discounted cash flow forecasts and their sensitivities are disclosed in Note 15.

For assets or cash-generating units (CGUs) that were previously impaired, if their recoverable amount now exceeds their carrying amount, an

impairment reversal is recognized in the consolidated statement of profit or loss.

Impairment of Right of Use Assets

The Group allocated the right of use assets to a cash generating unit, for impairment test within the respective CGU. The majority of the Group’s

right-of-use assets relate to leasehold land for agricultural purposes, being part of the Farming segment.

Details of the management assumptions used to assess the recoverable amount of cash-generating units in which right of use assets were allocated

are provided in Note 5 under the Impairment of Property, Plant and Equipment section and Note 15.

Impairment Testing of Goodwill and Intangible Assets with Indefinite Useful Lives

The Group assesses CGU for impairment whenever events or changes in circumstances indicate that the carrying amount of assets or CGU may

be impaired. Individual assets are grouped into CGUs to represent the lowest level within the entity at which the goodwill is monitored by manage-

ment.

Determining whether goodwill is impaired requires an estimation of the value in use or fair value less costs to sell of the cash-generating units to

which goodwill has been allocated. Where the carrying amount of a CGU exceeds its recoverable amount, the CGU is considered impaired and is

written down to its recoverable amount. The calculation of value in use requires management to estimate the future cash flows expected to arise

from the cash-generating unit and a suitable discount rate to calculate their present value.

Details of the management assumptions used to assess the recoverable amount of cash-generating units for which goodwill and intangible assets

with indefinite useful lives have been allocated are provided in Note 5 under Impairment of Property, Plant, and Equipment section and Notes 15,

17 and 18.

Functional currencies of different entities of the Group

Different entities within the Group have different functional currencies, based on the underlying economic conditions of their operations. This

determination of what the specific underlying economic conditions require judgment. In making this judgment, the Group evaluates among other

factors, the location of activities, the sources of revenue and risks associated with activities, denomination of currencies of operations of different

entities and degree of independence of subsidiaries’ business model. Specifically, in determination of the functional currencies of Kernel Trade

LLC, the Group based its judgement on the fact that the company operates internationally on the markets mainly influenced by the US Dollar (not

Ukrainian Hryvnia) and its major activities include the sale of goods to foreign customers. Moreover, most of its operations are denominated in US

Dollars and also, the US Dollar is the currency in which its business risks and exposures are managed, and the performance of their business is

measured. In determining the functional currency of the oil-processing plants and transshipment terminals, the Group based its judgement on the

degree of independence of those companies’ business model of Kernel Trade LLC.

Fair Value of Biological Assets and Agricultural Produce

Biological assets are recorded at fair value less costs to sell. The fair value of growing crops is determined using a discounted cash flow model

based on the expected crops’ yield by sowing area size, the market price for respective crops, and after allowing for harvesting costs, contributory

asset charges for the land and sowing areas and other costs yet to be incurred in getting the harvest to maturity.

The Group estimates the fair values of biological assets and agricultural produce based on the following assumptions:

• Expected crop yields (for crops in fields);

• Average weight and quality of animals;

• Productive life of one milk cow;

• Estimated future sales prices;

• Projected production costs and costs to sell; and

• Discount rate.

Although some of these assumptions are obtained from published market data, a majority of these assumptions are estimated based on the Group’s

historical and projected results (Note 13).

Fair value measurements

Derivative instruments are reported at their fair value, and the Group assesses the reliability and quality of the assumptions and data used for fair

value measurement following the three hierarchy levels as outlined in IFRS 13 Fair Value Measurement. Fair values are determined through the

following methods: firstly, they are externally verified by comparing them to quoted market prices in active markets (Level 1); secondly, they are

calculated using models that rely on externally verifiable inputs (Level 2); or thirdly, they are established using alternative procedures, such as

comparing them to similar instruments and/or utilizing models that involve unobservable market inputs, which necessitate the Group to make

assumptions based on market conditions (Level 3). It's worth noting that Level 3 inputs involve the highest degree of estimation uncertainty. Further

details regarding the management's estimates can be found in Note 36 of these consolidated financial statements.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Financial

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6. Operating Segments

Operating segments are reported in a manner consistent with the internal reporting as provided to the chief operating decision-makers to allocate

resources to the segment and to assess its performance. The executive management who are members of the Board of Directors of the Company

are identified as chief operating decision makers.

Segments in the consolidated financial statements are defined in accordance with the type of activity, products sold, or services provided. Seg-

mentation presented in these consolidated financial statements is consistent with the structure of financial information regularly reviewed by the

Group’s executive management, including the Chief Executive Officer. The operating segments’ performance is assessed based on a measure of

EBITDA.

The Group is presenting its segment results within three operating segments: Oilseed Processing, Infrastructure and Trading, and Farming.

In the Oilseed Processing segment, the Group combines oilseed origination, edible oil production and sales of bottled sunflower oil. Sunflower oil

in bulk is mostly sold further to the Infrastructure and Trading segment for global marketing.

In the Infrastructure and Trading segment, the Group combines results of grain trading, silo services and export terminals operations. These parts

of the business form an integrated supply chain which is managed jointly. Under the current framework, the management considers export terminals

and grain storage facilities as production assets which serve grain merchandizing business and consequently uses a combined throughput margin

to evaluate performance of Infrastructure and Trading business. The results of the Infrastructure and Trading segment incorporate savings achieved

by acquiring and employing the Group’s own railcar park. Also, the Infrastructure and Trading segment includes the results of the Avere Commod-

ities S.A. and its subsidiaries (hereinafter, Avere).

In the Farming segment, the Group reports result of its crop production business, which includes growing corn, wheat, soybean, sunflower seed,

and rapeseed on the leasehold land, as well as some minor crops and small cattle farming operations.

Presentation of the operating segments’ activities is as follows:

Operating segments

Activities

Oilseed Processing

Sunflower seed origination and sunflower oil production. Sales of bottled and bulk sunflower oil, Sales of sunflower

meal and Sales of electricity produced from sunflower husk.

Infrastructure and Trading

Sourcing and merchandising of wholesale edible oils, grain, provision of silo services, operating the fleet of logistics

assets for inland transportation and vessels, grain and sunflower oil handling and transshipment services.

Farming

Agricultural farming. Production of corn, wheat, soybean, sunflower seed, and rapeseed.

Income and expenses unallocated to any segment, which are related to the administration of the Group, were included in the ‘Other’ column.

The measures of profit and loss, and assets and liabilities are based on the Group accounting policies, which comply with IFRS Accounting Stand-

ards, as adopted by the European Union.

Reconciliation eliminates intersegment items. The segment data is calculated as follows:

• Intersegment sales reflect intergroup transactions effected on an arm’s length basis.

• Capital expenditures, amortization and depreciation related to property, plant and equipment, and intangible assets are allocated to segments

when possible.

The ‘Other’ column reflects income and expenses not allocated to segments.

Since the financial management of the Group’s companies is carried out centrally, borrowings, bonds, deferred taxes, and some other assets and

liabilities are not allocated directly to the respective operating segments and are presented in the ‘Other’ column. Consequently, the assets and

liabilities shown for individual segments do not include borrowings, bonds, deferred taxes, and some other assets and liabilities.

Seasonality of operations

The Oilseed Processing segment normally has seasonally lower sales in the first quarter of the financial year, which corresponds to the end of the

crushing season and lower production levels. The operations of the Farming segment reflect seasonality in the context of seeding and harvesting

campaigns, which are conducted mainly in November-May and June-November, respectively. The Infrastructure and Trading segment usually

experiences somewhat higher volumes in the several months after the commencement of the harvesting campaign (July for early grains and

September for crops harvested in autumn). In addition, the farming segment usually reflects a higher effect from the IAS 41 valuation of biological

assets in the last quarter of the financial year when more acreage is revalued to fair value less costs to sell and a higher effect from the IAS 41

valuation of agricultural produce in the first half of the financial year due to the completion of the harvesting campaign.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Financial

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7. Key Data by Operating Segment

Key data by operating segment for the year ended 30 June 2024:

Key data by operating segment for the year ended 30 June 2023:

Oilseed

Processing

Infrastruc-

ture and

Trading

Farming

Other

Reconcilia-

tion

Total

Revenue (external)

1,675,616

1,836,730

69,116

—

3,581,462

Intersegment sales

188,182

174,408

412,243

—

(774,833)

—

Total revenue

1,863,798

2,011,138

481,359

—

(774,833)

3,581,462

Net change in fair value of biological assets and agricul-

tural produce

—

(10,447)

—

(10,447)

Cost of sales

(1,652,609)

(1,678,238)

(332,945)

—

774,833

(2,888,959)

Other operating income

50,461

11,227

6,090

3,293

—

71,071

Other operating expenses

(19,038)

(2,024)

(83)

(1,738)

—

(22,883)

General, administrative and selling expenses

(18,154)

(99,078)

(20,370)

(75,771)

—

(213,373)

Net impairment losses on financial assets

(2,492)

(6,770)

—

(1,955)

—

(11,217)

(Loss)/reversal of impairment losses on assets

(172,324)

(60,719)

8,362

(4,545)

—

(229,226)

Profit/(loss) from operating activities

49,642

175,536

131,966

(80,716)

—

276,428

Amortization and depreciation

33,734

28,255

38,836

3,898

—

104,723

EBITDA

83,376

203,791

170,802

(76,818)

—

381,151

Reconciliation:

Finance costs

(119,079)

Finance income

49,819

Foreign exchange gain, net

32,972

Other expenses, net

(29,088)

Income tax expense

(43,424)

Profit for the period

167,628

Total assets

1,324,217

1,297,675

685,423

89,596

—

3,396,911

Capital expenditures

45,349

88,095

24,811

2,881

—

161,136

Liabilities

86,828

200,274

193,454

1,050,061

—

1,530,617

Oilseed

Processing

Infrastruc-

ture and

Trading

Farming

Other

Reconcilia-

tion

Total

Revenue (external)

966,517

2,445,638

42,966

—

3,455,121

Intersegment sales

941,164

156,209

652,189

—

(1,749,562)

—

Total revenue

1,907,681

2,601,847

695,155

—

(1,749,562)

3,455,121

Net change in fair value of biological assets and agricul-

tural produce

—

(114,705)

—

(114,705)

Cost of sales

(1,674,132)

(2,412,481)

(366,963)

—

1,749,562

(2,704,014)

Other operating income

19,801

17,211

12,326

4,209

—

53,547

Other operating expenses

(23,481)

—

(28)

(11,358)

—

(34,867)

General, administrative and selling expenses

(11,656)

(70,226)

(25,234)

(97,903)

—

(205,019)

Net reversal of impairment losses/(impairment) on finan-

cial assets

557

941

(465)

3,097

—

4,130

Reversal of impairment losses/(loss) on assets

21,923

(8,143)

(26,027)

(2,486)

—

(14,733)

Profit/(loss) from operating activities

240,693

129,149

174,059

(104,441)

—

439,460

Amortization and depreciation

29,651

24,608

47,068

3,459

—

104,786

EBITDA

270,344

153,757

221,127

(100,982)

—

544,246

Reconciliation:

Finance costs

(153,249)

Finance income

30,792

Foreign exchange gain, net

62,650

Other expenses, net

(11,829)

Income tax expense

(69,050)

Profit for the period

298,774

Total assets

1,859,659

1,207,011

585,219

233,280

—

3,885,169

Capital expenditures

45,523

52,100

4,436

1,566

—

103,625

Liabilities

113,473

188,527

239,979

1,599,195

—

2,141,174

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Financial

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Revenue from sales of goods and services allocated by the operating segment for the year ended 30 June under requirements of IFRS 15 was as

follows:

For the year ended 30 June 2024

For the year ended 30 June 2023

Oilseed

Processing

frastructure and

Trading

Farming

Total

Oilseed

Processing

Infrastructure

and Trading

Farming

Total

Revenue from sales of com-

modities

1,466,990

1,639,867

69,116

3,175,973

813,095

2,282,563

42,966

3,138,624

Freight and other services

208,626

196,863

—

405,489

153,422

163,075

—

316,497

Total external revenue from

contracts with customers

1,675,616

1,836,730

69,116

3,581,462

966,517

2,445,638

42,966

3,455,121

During the year ended 30 June 2024, revenues of approximately USD 206,668 thousand (2023: USD 228,327 thousand) were derived from a

single external customer. These revenues are attributed to Oilseeds processing and Infrastructure and Trading segments. Also, during that period,

export sales amounted to 93.5% of total external sales (2023: 91.9%).

During the year ended 30 June 2024, revenue from the Group’s top five customers accounted for approximately 24.3% of total revenue (for the

year ended 30 June 2023: 22.1%).

The Group’s revenue from external customers (based on the country of incorporation of the sales counterparty) and information about its segment

assets (non‑current assets excluding non-current financial assets and deferred tax assets) by geographical location are detailed below:

Revenue from external customers

Non-current assets

For the year ended

30 June 2024

For the year ended

30 June 2023

As of

30 June 2024

As of

30 June 2023

Asia

1,828,406

1,731,439

Ukraine

1,166,255

1,366,659

of which India

669,655

586,894

Other locations

16,368

29,531

Hong Kong

422,405

270,103

China

270,837

275,451

Singapore

249,884

262,818

Europe

1,641,656

1,512,780

of which Switzerland

517,401

418,794

Netherland

239,699

203,975

Ukraine

228,796

292,560

Spain

222,434

56,247

Other locations

111,400

210,902

Total

3,581,462

3,455,121

Total

1,182,623

1,396,190

None of the other locations represented more than 5% of total revenue or non-current assets individually.

8. Acquisition and Disposal of Subsidiaries

In September 2023, the Group divested one of its grain elevators located in the Kharkiv region. The net assets of the disposed entity as of the

disposal date were valued at USD 178 thousand and the cash consideration received was USD 1,067 thousand (of which USD 711 thousand was

received during this reporting period). The gain on disposal was USD 889 thousand.

On 22 December 2023, the Group completed the acquisition of 100% of the shares in an oil terminal, which constituted a business acquisition.

This acquisition significantly enhanced the Group’s sunflower oil export capacity via the Danube River. As of the acquisition date, the acquired net

assets were valued at USD 25,125 thousand. These assets included property, plant, and equipment worth USD 1,449 thousand, and intangible

assets valued at USD 23,692 thousand, according to a valuation provided by an independent appraiser. The total consideration amounted to USD

24,750 thousand and was fully settled during the financial year.

In June 2024, the Group divested two-grain storage facilities located in the Poltava region. The net assets of the disposed entities as of the date of

disposal were equal to USD 182 thousand and the cash consideration received was USD 1,741 thousand (fully settled). The gain on disposal was

USD 1,559 thousand.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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9. Cash and Cash Equivalents

The balances of cash and cash equivalents were as follows:

As of

30 June 2024

As of

30 June 2023

Cash in banks in USD

634,531

906,676

Cash in banks in UAH

150,527

39,560

Cash in banks in other currencies

24,522

7,863

Cash on hand

Total

809,584

954,103

Less bank overdrafts (Note 22)

(5)

(10)

Cash for the purposes of cash flow statement

809,579

954,093

In accordance with the international rating agency of Fitch, credit ratings of the banks with which the Group had the accounts opened as of

30 June were as follows:

As of

30 June 2024

As of

30 June 2023

International bank with F1+ rating

182,512

175,465

International bank with F1 rating

227,899

306,435

International bank with F2 rating

10,026

8,617

Banks with lower medium grade

193,172

160,047

Banks without international ratings

195,975

303,539

Total

809,584

954,103

As of 30 June 2024, the majority of balances held in banks without international ratings were bank accounts maintained in Ukrainian subsidiaries

of international banks, totaling USD 195,974 thousand (as of June 30, 2023: USD 299,414 thousand), where international banks were primarily

rated F2 or above by Fitch or similar rating agencies.

As of 30 June 2024 and 2023, the identified expected credit loss on cash and cash equivalents was immaterial.

The reconciliation in the table below presents changes in the Group’s liabilities arising from financing activities by incorporating cash flows and

non-cash changes over the reporting period.

Bank borrowings

(Note 22)

Lease liabilities

(Note 23)

Bonds Issued

(Note 24)

Total

As of 30 June 2022

1,093,087

239,552

602,650

1,935,289

Repayments net of proceeds

(269,391)

(48,579)

(39,750)

(357,720)

Non-cash movements

Additions and change of terms of lease liabilities

—

38,904

—

38,904

Disposals of lease liabilities

—

(9,386)

—

(9,386)

Non-cash settlement of lease liabilities

—

(2,366)

—

(2,366)

Amortization of one-off and transaction costs

—

1,173

Interest expense accrued (Note 31)

75,605

27,294

39,750

142,649

Interest expense capitalized (Note 15)

5,504

—

5,504

Foreign exchange movements

(29,443)

(2,189)

—

(31,632)

Other changes

(5,429)

—

(5,429)

Translation difference

—

(45,335)

—

(45,335)

As of 30 June 2023

869,933

197,895

603,823

1,671,651

Repayments net of proceeds

(597,031)

(43,804)

(39,750)

(680,585)

Non-cash movements

Additions and change of terms of lease liabilities

—

17,333

—

17,333

Disposals of lease liabilities

—

(7,270)

—

(7,270)

Non-cash settlement of lease liabilities

—

(1,888)

—

(1,888)

Amortization of one-off and transaction cost

—

1,369

Interest expense accrued (Note 31)

45,667

25,243

39,750

110,660

Interest expense capitalized (Note 15)

4,245

—

4,245

Foreign exchange movements

1,007

(642)

—

365

Other changes

(8,655)

—

(8,655)

Translation difference

—

(17,127)

—

(17,127)

As of 30 June 2024

315,166

169,740

605,192

1,090,098

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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10. Trade Accounts Receivable

The balances of trade accounts receivable were as follows:

As of

30 June 2024

As of

30 June 2023

Trade accounts receivable

321,742

335,493

Allowance for expected credit losses

(16,496)

(13,914)

Total

305,246

321,579

The average credit period on sales of goods is 33 days (2023: 26 days). The carrying value of trade receivables approximates the fair value.

As of 30 June 2024, a receivable balance of USD 285,734 thousand was due from international customers and the remaining USD 19,512 thousand

was receivable from Ukrainian buyers (30 June 2023: USD 271,465 thousand and USD 50,114 thousand accordingly).

The changes in expected credit loss provisions are recognized in the line Net reversal/(impairment) losses on financial assets. For the year ended

30 June 2024, an increase in loss allowance was USD 5,706 thousand (for the period ended 30 June 2023: decrease of USD 5,264 thousand).

Subsequent recoveries of amounts previously written off are credited against the same line item.

On this basis, the loss allowance as of 30 June was determined for trade accounts receivables as follows:

As of 30 June 2024

As of 30 June 2023

Current

Less than

90 days

past due

More than

90 days

past due

Total

Current

Less than 90

days past

due

More than

90 days past

due

Total

Expected loss rate

0.3%

99%

0.1%

1.1%

94.6%

Gross carrying amount

262,717

43,215

15,810

321,742

288,747

32,625

14,121

335,493

Loss allowance

(708)

(141)

(15,647)

(16,496)

(185)

(374)

(13,355)

(13,914)

Total

262,009

43,074

163

305,246

288,562

32,251

766

321,579

The movement in allowance for credit loss relating to trade accounts receivables as of 30 June is presented below:

Trade accounts receivables

Lifetime ECL

Individually as-

sessed

Total

Loss allowance as of 30 June 2022

13,713

5,968

19,681

Decrease in loss allowance recognized in profit or loss during the year

(3,854)

(1,410)

(5,264)

Trade receivables written off during the year as uncollectible

—

(503)

Loss allowance as of 30 June 2023

9,859

4,055

13,914

Increase in loss allowance recognized in profit or loss during the year

3,442

2,264

5,706

Trade receivables written off during the year as uncollectible

(388)

—

(388)

Unused amount reversed

—

(2,736)

Loss allowance as of 30 June 2024

12,913

3,583

16,496

Trade receivables are written off when it is unlikely that they will be recovered, based on indicators such as a debtor's failure to make payments or

other evidence demonstrating an inability to settle the outstanding amount.

11. Taxes Recoverable and Prepaid

The balances of taxes recoverable and prepaid were as follows:

As of

30 June 2024

As of

30 June 2023

Value-added tax recoverable and prepaid

113,900

161,967

Other taxes recoverable and prepaid

227

313

Total

114,127

162,280

Value-added tax recoverable and prepaid mainly represents value-added tax (‘VAT’) credits in relation to purchases of agricultural products on the

domestic market in Ukraine. Management expects that these balances will be recovered in full within 12 months after the reporting date through

cash collection or set-off with respective VAT liabilities. For the year ended 30 June 2024, the amount of VAT refunded by the government in cash

was USD 272,150 thousand (30 June 2023: USD 124,152 thousand).

Differences in expected loss rate are possible due to rounding

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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12. Inventory

The balances of inventories were as follows:

As of

30 June 2024

As of

30 June 2023

Raw materials

96,452

46,496

Goods for resale

72,699

76,249

Finished products

71,209

105,323

Products of agriculture

15,377

87,502

Fuel

8,331

10,338

Work in progress

2,179

4,372

Packaging materials

1,509

1,617

Other inventories

9,904

9,646

Total

277,660

341,543

As of 30 June 2024, no inventories were pledged as security for short-term borrowings (Note 22) (30 June 2023: USD 191,186 thousand).

As of 30 June 2024, write-downs of inventories to the net realizable value amounted to USD 2,783 thousand (30 June 2023: USD 65,690 thousand)

recognized within the Cost of Sales.

The Group reversed an inventory impairment of USD 4,136 thousand (2023: USD 29,528 thousand), as the Group managed to sell them after

restoration. Inventories recognized as an expense during the year ended 30 June 2024 amounted to USD 2,791 thousand (2023: USD 5,760

thousand) which were damaged as the result of the war and are recognized in the line Loss on impairment of assets (Note 30).

13. Biological Assets

The balances of biological assets were as follows:

As of

30 June 2024

As of

30 June 2023

Non-current assets

Non-current cattle

6,521

5,924

Total

6,521

5,924

Current assets

Crops in fields

186,051

146,239

Current cattle

1,661

1,656

Total

187,712

147,895

For the year ended 30 June 2024, the Group incurred a net loss of USD 10,447 thousand due to the revaluation of the biological assets and

agricultural produce to the fair value (2023: loss of USD 114,705 thousand). For the year ended 30 June 2024, the Group incurred a revaluation

loss of USD 51,838 thousand on agricultural products at the point of harvest (2023: loss of USD 86,769 thousand) and a revaluation gain of USD

41,872 thousand on crop-bearing fields (2023: loss of USD 26,763 thousand) and a revaluation loss of USD 481 thousand on livestock. The

changes in the fair value of biological assets were primarily driven by fluctuation in market prices at the time of valuation, along with reduced

expected yields due to unfavorable weather conditions.

The balances of crops in fields were as follows:

As of 30 June 2024

As of 30 June 2023

Hectares

Value

Hectares

Value

Wheat

93,112

62,009

61,009

35,471

Sunflower seed

66,946

45,031

119,589

38,144

Corn

86,486

42,020

83,685

34,588

Soybean

72,286

28,466

64,996

33,970

Rapeseed

13,720

8,332

10,151

3,980

Other

1,777

193

1,880

Total

334,327

186,051

341,310

146,239

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The following table represents the changes in the carrying amounts of crops in fields during the years ended 30 June 2024 and 2023:

Capitalized

expenditures

Effect of

biological

transformation

Fair value of

biological

assets

As of 30 June 2022

156,268

3,890

160,158

Expenditures capitalized in biological assets (harvest 2022)

89,784

—

89,784

Decrease due to harvest (harvest 2022)

(246,052)

(3,890)

(249,942)

Expenditures capitalized in biological assets (harvest 2023)

174,609

—

174,609

Loss arising from changes in fair value of biological assets (sowing under harvest 2023)

—

(26,763)

Translation difference

(1,900)

293

(1,607)

As of 30 June 2023

172,709

(26,470)

146,239

Expenditures capitalized in biological assets (harvest 2023)

100,871

—

100,871

Decrease due to harvest (harvest 2023)

(273,580)

26,470

(247,110)

Expenditures capitalized in biological assets (harvest 2024)

155,027

—

155,027

Gain arising from changes in fair value of biological assets (sowing under harvest 2024)

—

44,916

Translation difference

(10,848)

(3,044)

(13,892)

As of 30 June 2024

144,179

41,872

186,051

The fair value of agricultural produce at the date of harvest was estimated based on the prices obtained from the active markets and has been

classified within level 2 of the fair value hierarchy. Crops in fields and non-current cattle of the Group are measured using the discounted cash flow

technique, prices are quoted for the relevant region, and other metrics relevant to the groups of assets. These biological assets are included within

level 3 of the fair value hierarchy. Current cattle are measured based on market prices of livestock of similar age, breed, and genetic merit, which

is within level 2 of the fair value hierarchy. The change in the balances of livestock is represented by an increase in heads of milk cows within

regular transfer from young calves to mature herd and the variation in prices and exchange rates between reporting dates.

In the table below biological assets are classified into the levels prescribed under the accounting standards:

(Levels in thousands of USD)

As of 30 June 2024

As of 30 June 2023

Measure

Quantity

Level 2

Level 3

Total

Quantity

Level 2

Level 3

Total

Livestock

Mature – Milk cows

Heads

4,772

—

6,521

5,052

—

5,922

Immature – Milk cows

Heads

2,186

988

—

988

2,480

998

—

998

Immature – Calves

Heads

2,062

654

—

654

2,469

623

—

623

Other

Heads/Hives

318

—

1,106

—

Crops in fields

Hectares

334,327

—

186,051

341,310

—

146,239

Total

1,661

192,572

194,233

1,658

152,161

153,819

There have been no changes in the valuation technique and transfers between levels during the year.

This table summarizes the quantitative information about the significant unobservable inputs used in the fair value measurements of the crops in

field and milk cows.

Fair value

Range of unobservable inputs (average)

Descrip-

tion

Valuation

techniques

As of

30 June

2024

As of

30 June

2023

Unobservable

Inputs

As of

30 June

2024

As of

30 June

2023

Relationship of

unobservable inputs to

fair value

Crops in

field

Discounted

cash flows

186,051

146,239

Crop yields

2.00 – 7.34 (4.68)

tons per hectare

2.34 – 8.82 (4.78)

tons per hectare

The higher the crop yield, the

higher the fair value

Grain sales

prices net of

transportation

costs

153 – 411 (306) USD

per ton

144 – 446 (273) USD

per ton

The higher the market price,

the higher the fair value

Discount rate

25.00% (in UAH)

24.40% (in UAH)

The higher the discount rate,

the lower the fair value

Milk cows

Discounted

cash flows

6,521

5,922

Milk yield – liter

per cow

18.42 – 22.18 (20.94)

liters per cow per day

19.22 – 22.21 (21.22)

liters per cow per day

The higher the milk yield, the

higher the fair value

Weight of 1 calf

29 – 32 (31) kg

The higher the weight, the

higher the fair value

Average yield of

calves from 100

cows per year

26 – 64 (56) calves

55 – 64 (59) calves

The higher the yield, the higher

the fair value

Discount rate, %

25.00% (in UAH)

24.40% (in UAH)

The higher the discount rate,

the lower the fair value

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

If the above-mentioned inputs of the valuation model were 5 percent higher/lower while all other variables were held constant, as of 30 June 2024,

the carrying amount of the current and non-current biological assets would increase/decrease by USD 20,524 thousand and USD 39,721 thousand,

respectively (30 June 2023: by USD 31,014 thousand and USD 29,653 thousand, respectively).

14. Other Financial Assets

The balances of other financial assets were as follows:

As of

30 June 2024

As of

30 June 2023

Government bonds

185,310

16,058

Margin account with brokers (Note 37)

82,215

65,993

Derivative financial instruments (Note 37)

25,288

13,842

Loans granted

22,306

41,092

Short-term bank deposits

12,747

7,127

Pledge deposits

1,303

122,703

Receivable from the disposal of subsidiaries (Note 8, 34)

—

90,000

Other financial assets

10,760

19,248

Total

339,929

376,063

As of 30 June 2024, no other financial assets were pledged as security for short-term borrowings (30 June 2023: USD 130,702 thousand) (Note

22).

The Group's exposure to credit risks associated with other financial assets is disclosed in Note 36.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

15. Property, Plant and Equipment

The following table represents movements in property, plant and equipment for the year ended 30 June 2024:

Oilseed

Processing

Infrastructure

and Trading

Farming

Other

Total

Net Book Value as of 30 June 2023

616,627

340,999

41,559

21,226

1,020,411

Land

266

1,035

1,048

2,379

Buildings and Constructions

272,068

139,352

12,767

16,947

441,134

Production machinery and equipment

132,714

77,337

1,348

964

212,363

Agricultural equipment and vehicles

6,541

104,034

25,843

1,276

137,694

Other fixed assets

1,906

1,557

675

988

5,126

CIP and uninstalled equipment

203,132

17,684

896

221,715

Additions in CIP and uninstalled equipment

44,973

87,804

24,218

1,654

158,649

Reclassification

(93)

(2)

—

Land

—

(13)

—

(12)

Buildings and Constructions

611

—

655

Production machinery and equipment

(657)

—

(4)

(584)

Agricultural equipment and vehicles

(1)

(2)

(41)

—

(44)

Other fixed assets

(2)

(6)

(8)

CIP and uninstalled equipment

(44)

—

(7)

Additions from acquisition of subsidiaries

—

1,449

—

1,449

Buildings and Constructions

—

1,367

—

1,367

Production machinery and equipment

—

Other fixed assets

—

CIP and uninstalled equipment

—

Transfers

—

Land

—

2,809

—

2,823

Buildings and Constructions

78,699

40,396

904

120,065

Production machinery and equipment

132,856

5,656

106

138,619

Agricultural equipment and vehicles

3,430

28,792

21,350

469

54,041

Other fixed assets

2,087

727

1,843

374

5,031

CIP and uninstalled equipment

(217,072)

(78,380)

(24,217)

(910)

(320,579)

Disposals (at NBV)

(1,091)

(8,456)

(423)

(735)

(10,705)

Land

(94)

—

(4)

—

(98)

Buildings and Constructions

(126)

(114)

(139)

—

(379)

Production machinery and equipment

(43)

(158)

(19)

(3)

(223)

Agricultural equipment and vehicles

(25)

(7,980)

(230)

—

(8,235)

Other fixed assets

(158)

—

(28)

(5)

(191)

CIP and uninstalled equipment

(645)

(204)

(3)

(727)

(1,579)

Disposal of Subsidiaries (at NBV)

—

(280)

—

(280)

Buildings and Constructions

—

(215)

—

(215)

Production machinery and equipment

—

(63)

—

(63)

Agricultural equipment and vehicles

—

(1)

—

(1)

CIP and uninstalled equipment

—

(1)

—

(1)

Depreciation expense

(33,047)

(27,027)

(12,173)

(1,731)

(73,978)

Buildings and Constructions

(13,639)

(6,081)

(1,258)

(587)

(21,565)

Production machinery and equipment

(17,028)

(6,817)

(291)

(435)

(24,571)

Agricultural equipment and vehicles

(1,508)

(13,418)

(10,125)

(468)

(25,519)

Other fixed assets

(872)

(711)

(499)

(241)

(2,323)

Impairment and reversal of property, plant and equipment

(121,075)

(17,647)

746

—

(137,976)

Land

—

(252)

—

(252)

Buildings and Constructions

(48,112)

(9,480)

—

(57,592)

Production machinery and equipment

(62,746)

(7,369)

—

(70,115)

Agricultural equipment and vehicles

—

(84)

—

(84)

Other fixed assets

—

746

—

746

CIP and uninstalled equipment

(10,217)

(462)

—

(10,679)

Translation difference

(683)

(8,049)

(4,656)

(78)

(13,466)

Land

—

(97)

(4)

—

(101)

Buildings and Constructions

(1)

(5,714)

(1,226)

(21)

(6,962)

Production machinery and equipment

—

(1,609)

(112)

—

(1,721)

Agricultural equipment and vehicles

(624)

(86)

(3,040)

(5)

(3,755)

Other fixed assets

(6)

(67)

(107)

(47)

(227)

CIP and uninstalled equipment

(52)

(476)

(167)

(5)

(700)

Net Book Value as of 30 June 2024

505,611

368,880

49,279

20,334

944,104

Land

172

3,497

1,048

4,740

Buildings and Constructions

289,500

159,524

11,079

16,405

476,508

Production machinery and equipment

185,096

67,067

1,032

523

253,718

Agricultural equipment and vehicles

7,813

111,255

33,757

1,272

154,097

Other fixed assets

2,955

1,511

2,624

1,071

8,161

CIP and uninstalled equipment

20,075

26,026

764

46,880

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The following table represents movements in property, plant and equipment for the year ended 30 June 2023:

Oilseed

Processing

Infrastructure

and Trading

Farming

Other

Total

Net Book Value as of 30 June 2022

603,677

327,502

63,665

23,229

1,018,073

Land

266

502

1,048

1,861

Buildings and Constructions

281,955

152,231

15,187

17,540

466,913

Production machinery and equipment

141,285

83,424

1,378

1,588

227,675

Agricultural equipment and vehicles

4,745

70,774

44,222

1,702

121,443

Other fixed assets

2,125

1,596

—

647

4,368

CIP and uninstalled equipment

173,301

18,975

2,833

704

195,813

Additions in CIP and uninstalled equipment

44,946

51,796

3,819

591

101,152

Reclassification

(310)

656

(370)

—

Buildings and Constructions

375

(315)

370

—

430

Production machinery and equipment

(104)

(373)

270

(40)

(247)

Agricultural equipment and vehicles

(10)

(30)

(1)

(31)

Other fixed assets

(17)

101

CIP and uninstalled equipment

(220)

362

—

(395)

(253)

Additions from acquisition of subsidiaries

—

8,507

—

8,507

Land

—

632

—

632

Buildings and Constructions

—

6,387

—

6,387

Production machinery and equipment

—

915

—

915

Agricultural equipment and vehicles

—

Other fixed assets

—

CIP and uninstalled equipment

—

516

—

516

Transfers

—

Land

—

Buildings and Constructions

2,263

3,026

1,823

7,151

Production machinery and equipment

6,077

4,684

308

11,102

Agricultural equipment and vehicles

3,999

44,439

1,795

100

50,333

Other fixed assets

525

815

995

446

2,781

CIP and uninstalled equipment

(12,864)

(52,966)

(4,921)

(618)

(71,369)

Disposals (at NBV)

(1,042)

(348)

(416)

(17)

(1,823)

Land

—

(5)

—

(5)

Buildings and Constructions

—

(275)

—

(275)

Production machinery and equipment

(69)

(34)

(3)

(109)

Agricultural equipment and vehicles

(30)

(45)

(58)

(11)

(144)

Other fixed assets

(6)

(8)

(43)

(3)

(60)

CIP and uninstalled equipment

(937)

(261)

(32)

—

(1,230)

Disposal of Subsidiaries (at NBV)

—

(276)

—

(276)

Buildings and Constructions

—

(173)

—

(173)

Production machinery and equipment

—

(80)

—

(80)

Agricultural equipment and vehicles

—

(15)

—

(15)

Other fixed assets

—

(8)

—

(8)

Transfers from Right-of-Use Assets

—

703

—

703

Agricultural equipment and vehicles

—

703

—

703

Transfers to Assets classified as held for sale (at NBV)

(1,052)

—

(1,052)

CIP and uninstalled equipment

(1,052)

—

(1,052)

Depreciation expense

(29,056)

(23,708)

(14,194)

(1,851)

(68,809)

Buildings and Constructions

(12,525)

(6,254)

(1,297)

(583)

(20,659)

Production machinery and equipment

(14,475)

(7,288)

(329)

(614)

(22,706)

Agricultural equipment and vehicles

(1,347)

(9,497)

(12,256)

(486)

(23,586)

Other fixed assets

(709)

(669)

(312)

(168)

(1,858)

Impairment of assets

—

(1,439)

—

(1,439)

Agricultural equipment and vehicles

—

(1,439)

—

(1,439)

Translation difference

(870)

(20,725)

(12,674)

(356)

(34,625)

Land

—

(101)

(10)

—

(111)

Buildings and Constructions

—

(15,550)

(3,041)

(49)

(18,640)

Production machinery and equipment

—

(3,912)

(276)

—

(4,188)

Agricultural equipment and vehicles

(816)

(222)

(8,533)

(28)

(9,599)

Other fixed assets

(12)

(202)

(11)

—

(225)

CIP and uninstalled equipment

(42)

(738)

(803)

(279)

(1,862)

Net Book Value as of 30 June 2023

616,627

340,999

41,559

21,226

1,020,411

Land

266

1,035

1,048

2,379

Buildings and Constructions

272,068

139,352

12,767

16,947

441,134

Production machinery and equipment

132,714

77,337

1,348

964

212,363

Agricultural equipment and vehicles

6,541

104,034

25,843

1,276

137,694

Other fixed assets

1,906

1,557

675

988

5,126

CIP and uninstalled equipment

203,132

17,684

896

221,715

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The total cost of property, plant and equipment and total accumulated depreciation as of 30 June 2024 and 2023 were as follows:

Cost as of

30 June 2024

Accumulated

depreciation and

impairment losses

as of 30 June 2024

Cost as of

30 June 2023

Accumulated

depreciation as of

30 June 2023

Land

4,991

(251)

2,379

—

Buildings and constructions

605,857

(129,349)

500,724

(59,590)

Production machinery and equipment

395,871

(142,153)

283,782

(71,419)

Agricultural equipment and vehicles

312,571

(158,474)

289,229

(151,535)

Other fixed assets

26,457

(18,296)

23,161

(18,035)

CIP and uninstalled equipment

46,880

—

221,715

—

Total

1,392,627

(448,523)

1,320,990

(300,579)

Had the Group’s buildings and constructions and production machinery and equipment (Oilseed Processing segment) been measured on a histor-

ical cost basis, their carrying amount would have been as follows:

As of

30 June 2024

As of

30 June 2023

Buildings and constructions

233,892

210,976

Production machinery and equipment

173,948

122,655

Total

407,840

333,631

In 2024, the Group completed the construction of Ukraine's largest oilseed processing plant (Starokostiantynivskyi OEZ LLC) and transferred it

from CIP and uninstalled equipment to the respective classes of property, plant, and equipment. Transfers from CIP also included port infrastructure

assets and vessels.

During the financial year 2024, due to damage caused by shelling from the Russian missiles, there was a write-off of port infrastructure assets in

the amount of USD 9,795 thousand and elevator blocks due to shelling and emergencies in the amount of USD 1,367 thousand.

For the year ended 30 June 2024, interest was capitalized in the amount of USD 4,245 thousand (2023: USD 5,504 thousand) (Note 9). For the

year ended 30 June 2024, there were no borrowing costs eligible for capitalization apart from project-specific borrowings.

As of 30 June 2024, prepayments for property, plant and equipment were in the amount of USD 9,467 thousand (30 June 2023: USD 21,268

thousand).

As of 30 June 2024, property, plant and equipment with a carrying amount of USD 437,930 thousand (30 June 2023: USD 406,731 thousand) were

pledged by the Group as collateral against short-term and long-term bank borrowings (Note 22).

In 2023, the evaluation of value in use was based on probability-weighted discounted cash flow scenarios, which better reflected the recoverable

amount of the asset or cash-generating unit, considering the increased risks and uncertainties caused by the war. The Group applied three prob-

ability-weighted scenarios, dependent on the timeline for Ukrainian Black Sea ports to resume full operations. This timeline significantly impacted

key assumptions in the value-in-use calculation, such as product prices, transportation costs, and working capital. Should the Group exclude risk

and uncertainties caused by at the war, from the assumptions the discount rate would have been 24.4% for UAH-denominated cash flows and

17.1% for USD-denominated cash flows. In 2024, in response to the ongoing military invasion of Ukraine, the Group reorganized its business

processes to address current challenges and ensure governance continuity. As a result, the 2024 evaluation of the recoverable amount of assets

or cash-generating units was based on a single model. Risks and uncertainties caused by the war are incorporated into the discount rate calculation,

while cash flow forecasts are free from those risks and uncertainties.

As a result of impairment testing performed as of 30 June 2024 impairment losses on property, plant and equipment were recognized for the

Starokostiantynivskyi OEZ LLC, Prydniprovskyi OEP LLC, Kropyvnytskyi OEP PJSC, Poltava-Zerno LLC, Danube Prom Agro LLC, Poltava HPP

PJSC CGUs in the amount of USD 103,933 thousand, USD 5,862 thousand, USD 1,576 thousand, USD 4,731 thousand, USD 616 thousand, USD

1,156 thousand respectively and reversed the previously recognized revaluation surplus of USD 9,909 thousand. The reversal amount of impair-

ment on property, plant, and equipment for farming, in the amount of USD 759 thousand, was recognized in the consolidated statement of profit

and loss.

The recoverable amount of each CGU where impairment was identified was determined based on discounted cash flow projections based on

reliable estimates of future cash flow calculations. Management determined the budgeted gross margin based on expectations of market develop-

ments. The weighted average growth rate used was consistent with forecasts included in industry reports. The discount rates used were pre-tax

and reflected specific risks relating to the relevant segments.

The results of the impairment test indicate that the recoverable amount of cash-generating units (CGUs) in the oil processing segment has signifi-

cantly changed. This is primarily due to a decrease in selling prices for oil products and an increase in the purchase prices of oilseeds, which has

led to a substantial decline in profit margins.

Kernel Holding S.A. Annual Report and Accounts for the year ended 30 June 2024 |

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

Oilseed Processing segment

The key assumptions used in the value-in-use and income approach calculations by the Group of CGUs in the Oilseed Processing segment are

as follows:

Oilseed processing

Processing volume, thou-

sand ton

Sales price of sunflower oil,

USD per ton

Transportation costs,

USD per ton

Purchase price of sunflower

seeds, USD per ton

As of 30 June 2024

3,285

901 - 950

9 - 36

420 - 441

As of 30 June 2023

2,979

813 - 1,050

15 - 108

335 - 517

As of 30 June 2024, the discount rate 18.5% was used for five-year period and 15.5% for terminal period (30 June 2023 10.6% and 10.6%

respectively).

As of 30 June 2024, the growth rate, used for extrapolating of the cash flows for periods over 5 years was set at the level of 2.21% (30 June 2023

– 2.1%).

As of 30 June 2024, the sensitivity analysis to the mentioned above key assumptions of the CGUs in the Oilseeds Processing segment are disclosed

in the table below.

CGU

Inputs

Change in input by:

Poltava OEP PJSC

Sales price of sunflower oil, USD per ton

Decrease by 3.00%

Impairment of USD 31,064 required

Purchase price of sunflower seeds, USD per ton

Increase by 3.00%

Impairment of USD 32,788 required

Discount rates

Increase by 10.00%

Impairment of USD 12,173 required

Processing volume, thousand ton

Decrease by 15.00%

Impairment of USD 12,632 required

Transportation costs, USD per ton

Increase by 17.4

USD per ton

Impairment of USD 19,390 required

Bandurka OEP LLC

Sales price of sunflower oil, USD per ton

Decrease by 3.00%

Impairment of USD 36,739 required

Purchase price of sunflower seeds, USD per ton

Increase by 3.00%

Impairment of USD 38,822 required

Discount rates

Increase by 10.00%

Impairment of USD 13,159 required

Processing volume, thousand ton

Decrease by 15.00%

Impairment of USD 16,064 required

Transportation costs, USD per ton

Increase by 16.9

USD per ton

Impairment of USD 22,606 required

BSI LLC

Sales price of sunflower oil, USD per ton

Decrease by 1.33%

Recoverable amount equals carrying amount

Decrease by 3.00%

Impairment of USD 22,528 required

Purchase price of sunflower seeds, USD per ton

Increase by 1.26%

Recoverable amount equals carrying amount

Increase by 3.00%

Impairment of USD 24,850 required

Discount rates

Increase by 9.33%

Recoverable amount equals carrying amount

Increase by 10.00%

Impairment of USD 1,152 required

Processing volume, thousand ton

Decrease by 10.48%

Recoverable amount equals carrying amount

Decrease by 15.00%

Impairment of USD 7,718 required

Kropyvnytskyi

Sales price of sunflower oil, USD per ton

Decrease by 3.00%

Impairment of USD 25,963 required

OEP PJSC

Purchase price of sunflower seeds, USD per ton

Increase by 3.00%

Impairment of USD 27,407 required

Discount rates

Increase by 10.00%

Impairment of USD 7,494 required

Processing volume, thousand ton

Decrease by 15.00%

Impairment of USD 9,251 required

Transportation costs, USD per ton

Increase by 16.9

USD per ton

Impairment of USD 15,930 required

Prydniprovskyi

Sales price of sunflower oil, USD per ton

Decrease by 3.00%

Impairment of USD 55,331 required

OEP LLC

Purchase price of sunflower seeds, USD per ton

Increase by 3.00%

Impairment of USD 58,437 required

Discount rates

Increase by 10.00%

Impairment of USD 18,729 required

Processing volume, thousand ton

Decrease by 15.00%

Impairment of USD 21,123 required

Transportation costs, USD per ton

Increase by 16.9

USD per ton

Impairment of USD 33,970 required

Starokostiantynivskyi

Sales price of sunflower oil, USD per ton

Decrease by 3.00%

Impairment of USD 59,299 required

OEZ LLC

Purchase price of sunflower seeds, USD per ton

Increase by 3.00%

Impairment of USD 62,599 required

Discount rates

Increase by 10.00%

Impairment of USD 19,545 required

Processing volume, thousand ton

Decrease by 15.00%

Impairment of USD 25,213 required

Transportation costs, USD per ton

Increase by 16.9

USD per ton

Impairment of USD 36,058 required

As of 30 June 2024, the sensitivity analysis did not identify the recoverable amount as being sensitive to the reasonably possible changes of

assumptions other than disclosed above.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

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Report

Corporate

Governance

Financial

Statements

Farming segment

As of 30 June 2024, the market selling prices of agricultural commodities have been taken into consideration while determining the assumptions

for Farming CGU. The key assumptions used in the value-in-use and income approach calculations by segment are as follows:

Farming

Crop yields,

tons per hectare

Sales price of crops,

USD per ton

Transportation cost,

USD per ton

As of 30 June 2024

2 - 13.3

194 - 472

8 - 29

As of 30 June 2023

2 - 9

213 - 552

28 - 108

As of 30 June 2024, the discount rate 25.0% was used for five-year period and 17.0% for terminal period (30 June 2023 17.5% and 17.5%

respectively).

As of 30 June 2024, the growth rate, used for extrapolating of the cash flows for periods over 5 years was set at the level of 4.03% (30 June 2023

– 5.1%)

If the sales price of the crop used in the value-in-use calculation for the Farming CGU had been 5% lower than management’s estimates, the Group

would have had to recognize an impairment against the carrying amount of property, plant, and equipment of USD 77,231 thousand.

As of 30 June 2024, the sensitivity analysis did not identify the recoverable amount of Farming CGU as being sensitive to the reasonably possible

changes of assumptions other than those disclosed above.

As of 30 June 2024 and 2023, as the result of the test, the recoverable amount of assets within the Farming segment was significantly low in their

carrying value. Hence, the Group determined a recoverable amount based on the fair value less cost-to-sell method, using the adjusted market

approach (level 2 of the fair value hierarchy).

Infrastructure and Trading segment

As of 30 June 2024 and 2023, the Infrastructure and Trading segment’s CGU assumptions rely on transshipment rates and suggested proceeded

volumes. The key assumptions used in the value-in-use and income approach calculations by Group of CGU in the Infrastructure and Trading

segment are as follows:

Infrastructure and Trading

Transshipment rate,

USD per ton

Transshipment volume,

thousand ton

As of 30 June 2024

8 - 14

0 - 6,800

As of 30 June 2023

9 - 15

0 - 9,840

As of 30 June 2024, the discount rate 18,5% was used for five-year period and 15.5% for terminal period (30 June 2023 10.6% and 10.6%

respectively).

As of 30 June 2024, the growth rate, used for extrapolating of the cash flows for periods over 5 years was set at the level of 2.21% (30 June 2023

– 2.1%).

CGU

Inputs

Change in input by:

Transbulkterminal and

Transgrainterminal

Transshipment rate, USD per ton

Decrease by 26.3%

Recoverable amount equals carrying amount

Decrease by 30.0%

Impairment of USD 15,762 required

Transshipment volume, thousand ton

Decrease by 2,0 thousand ton

Recoverable amount equals carrying amount

Decrease by 2.7 thousand ton

Impairment of USD 36,435 required

Poltava-Zerno LLC

Transshipment rate, USD per ton

Decrease by 30.0%

Impairment of USD 19,698 required

Transshipment volume, thousand ton

Decrease by 490 ton

Impairment of USD 21,291 required

As of 30 June 2023, the impairment test did not identify the CGUs in the Infrastructure and Trading segments as being sensitive to reasonably

possible changes in key assumptions.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

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Report

Corporate

Governance

Financial

Statements

16. Right-of-Use Assets

The following table represents movements in right-of-use assets for the year ended 30 June 2024:

Land

Agricultural equip-

ment and vehicles

Buildings

Total

Cost as of 30 June 2023

263,789

7,521

7,514

278,824

Additions and modifications

17,248

—

531

17,779

Disposals

(16,848)

(800)

(98)

(17,746)

Translation difference

(23,760)

(1,238)

(55)

(25,053)

Cost as of 30 June 2024

240,429

5,483

7,892

253,804

Accumulated depreciation and impairment as of 30

June 2023

(66,033)

(5,393)

(1,754)

(73,180)

Depreciation

(23,075)

(1,367)

(522)

(24,964)

Disposals

9,790

252

(25)

10,017

Impairment loss on right-of-use assets (Note 30)

(72)

—

(72)

Translation difference

5,926

1,336

7,326

Accumulated depreciation and impairment as of 30

June 2024

(73,464)

(5,172)

(2,237)

(80,873)

Net book value as of 30 June 2024

166,965

311

5,655

172,931

The following table represents movements in right-of-use assets for the year ended 30 June 2023:

Land

Agricultural equip-

ment and vehicles

Buildings

Total

Cost as of 30 June 2022

299,661

10,726

8,056

318,443

Additions and modifications

37,923

3,169

128

41,220

Transfer of assets to Property, Plant and Equipment

—

(3,995)

—

(3,995)

Disposals

(15,165)

(861)

(570)

(16,596)

Translation difference

(58,630)

(1,518)

(100)

(60,248)

Cost as of 30 June 2023

263,789

7,521

7,514

278,824

Accumulated depreciation as of 30 June 2022

(61,041)

(8,144)

(1,518)

(70,703)

Depreciation

(23,103)

(2,398)

(523)

(26,024)

Disposals

5,758

861

236

6,855

Transfer of assets to Property, Plant and Equipment

—

3,292

—

3,292

Translation difference

12,353

996

13,400

Accumulated depreciation as of 30 June 2023

(66,033)

(5,393)

(1,754)

(73,180)

Net book value as of 30 June 2023

197,756

2,128

5,760

205,644

The impairment testing of right-of-use assets, along with the property, plant, and equipment of the Farming segment, was conducted by internal

specialists. The recoverable amount of the assets was determined using the value-in-use method, which is based on estimated future cash flows

discounted to their present value using an appropriate discount rate. The cash flow forecasts applied in the value-in-use approach were derived

from financial budgets approved by management, covering five years, and were extrapolated using estimated growth rates for periods beyond

five years. The calculation of the discount rate is based on assumptions specific to the Group and the operating segments to which they apply.

For the year ended 30 June 2024 because of impairment testing, the Group recognized losses of USD 72 thousand. The impairment model level

of sensitivity disclosed in Note 15 was not identified as being sensitive to reasonably possible changes in key assumptions.

17. Intangible Assets

The following table represents movements in intangible assets for the year ended 30 June 2024:

Trademarks

Land

lease rights

Other

intangible assets

Total

Cost as of 1 July 2023

22,036

80,771

24,812

127,619

Additions

—

2,487

Additions from the acquisition of subsidiaries (Note 8)

—

23,692

Disposals

—

(185)

Translation difference

—

(7,268)

(201)

(7,469)

Cost as of 30 June 2024

22,036

73,503

50,605

146,144

Accumulated amortization and impairment losses as of 1 July 2023

(8,851)

(76,817)

(5,617)

(91,285)

Amortization charge

—

(222)

(1,958)

(2,180)

Disposals

—

187

Impairment and reversal of impairment of intangible assets

—

5,281

(29,138)

(23,857)

Translation difference

—

7,269

116

7,385

Accumulated amortization and impairment losses as of 30 June 2024

(8,851)

(64,489)

(36,410)

(109,750)

Net book value as of 30 June 2024

13,185

9,014

14,195

36,394

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The following table represents movements in intangible assets for the year ended 30 June 2023:

Trademarks

Land lease

rights

Crypto

assets

Other

intangible

assets

Total

Cost as of 1 July 2022

22,036

94,486

100,195

17,254

233,971

Additions

—

7,750

2,473

10,223

Additions from acquisition of subsidiaries

11,631

Disposals

—

(125,745)

(720)

(126,465)

Transfer from current assets

—

17,800

—

17,800

Translation difference

—

(13,715)

—

(5,826)

(19,541)

Cost as of 30 June 2023

22,036

80,771

—

24,812

127,619

Accumulated amortization and impairment losses as of 1 July 2022

(8,769)

(92,256)

—

(8,748)

(109,773)

Amortization charge

—

(225)

—

(1,168)

(1,393)

Disposals

—

2,412

617

3,029

Impairment of intangible assets

(82)

—

(2,412)

—

(2,494)

Translation difference

—

15,664

—

3,682

19,346

Accumulated amortization and impairment losses as of 30 June 2023

(8,851)

(76,817)

—

(5,617)

(91,285)

Net book value as of 30 June 2023

13,185

3,954

—

19,195

36,334

Included in the intangible assets of Subsidiaries are the ‘Schedry Dar’, ‘Stozhar’, ‘Zolota’ and ‘Domashnya’ trademarks with net book values of

USD 4,567 thousand, USD 5,459 thousand, USD 2,980 thousand, and USD 179 thousand, respectively, in 2024 (USD 4,567 thousand, USD 5,459

thousand, USD 2,980 thousand and USD 179 thousand, respectively, in 2023). These trademarks are used by the Group for the sale of bottled

sunflower oil mostly in the Ukrainian market.

The trademarks that belong to the Group are considered to have an indefinite useful life and thus are not amortized but tested for impairment by

comparing their recoverable amount with their carrying amount annually on 30 June and whenever there is an indication that the trademarks may

be impaired.

As a result of impairment testing performed as of 30 June 2024, no impairment loss was recognized for trademarks. In comparison, as of 30 June

2023, impairment losses were recognized for the 'Stozhar' and 'Zolota' trademarks, amounting to USD 94 thousand and USD 9 thousand, respec-

tively. Additionally, the impairment loss previously recognized for the 'Schedry Dar' trademark was reversed by USD 21 thousand.

The recoverable amount of the trademarks was based on the fair value less costs to sell method using the royalty approach of valuation and is

classified within level 3 of the fair value hierarchy. This calculation uses cash flow projections based on financial budgets approved by management

and covering five years. The total amount of the trademarks was allocated to the Oilseed Processing segment (as one cash-generating unit).

The impairment testing of the value of intangible assets including trademarks, as of 30 June 2024 was based on the same assumptions as the

impairment test for property, plant and equipment (Note 15).

18. Goodwill

The following table represents movements in goodwill for the year:

For the year ended

30 June 2024

For the year ended 30

June 2023

Cost at the beginning of the year

132,293

132,281

Additions

—

Cost at the end of the year

132,293

Accumulated impairment losses at the beginning of the year

(60,661)

Impairment losses recognized in the year

(58,436)

—

Accumulated impairment losses at the end of the year

(119,097)

(60,661)

Balance at the end of the year

13,196

71,632

A summary of goodwill allocated to individual entities or groups of entities as separate CGU, was aggregated at the segment level and presented

below:

Goodwill carrying value

Segment

CGU

As of 30 June 2024

As of 30 June 2023

Oilseed Processing

Kropyvnytskyi OEP PJSC

—

28,978

Prydniprovskyi OEP LLC

—

29,446

Infrastructure and Trading

Transbulkterminal and Transgrainterminal

9,594

RTK-Ukraine

3,602

Oilexportterminal

—

Total

13,196

71,632

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The Group tests whether goodwill has suffered on impairment at the level of the CGU on an annual basis. The recoverable amount of a CGU was

determined based on the higher value from value-in-use or fair value less cost of disposal. The impairment test of goodwill was based on the same

assumptions as the impairment test for property, plant and equipment (Note 15). Sensitivity to the mentioned above key assumptions, as of 30

June 2024, is described in Note 15.

As of 30 June 2024, the Group recognized an impairment charge against goodwill in the amount of USD 58,436 thousand (as of 30 June 2023: nil)

attributable to the Oilseed Processing and included within the line Loss on impairment of assets (Note 30).

19. Other non-current assets

The balances of other non-current assets were as follows:

As of

30 June 2024

As of

30 June 2023

Prepayments for property, plant and equipment

9,467

21,268

Non-current biological assets

6,521

5,924

Other non-current assets

Value-added tax recoverable and prepaid

—

34,958

Total

15,998

62,169

As of 30 June 2024, the portion of VAT recoverable and prepaid presented under Other non-current assets was nil, as the planned utilization period

for this amount is less than 12 months (30 June 2023: USD 34,958 thousand). The reversal of VAT allowance, amounting to USD 5,538 thousand,

was recognized under Loss on impairment of assets (30 June 2023: expenses for USD 8,530) (Note 30).

20. Advances from Customers and Other Current Liabilities

The balances of advances from customers and other current liabilities were as follows:

As of

30 June 2024

As of

30 June 2023

Accrued payroll, payroll-related taxes, and bonuses

118,747

87,773

Contract liabilities

38,059

49,042

Provision for unused vacations and other provisions

9,161

7,274

Taxes payable and provision for tax liabilities

6,938

4,284

Other current liabilities

4,274

5,397

Total

177,179

153,770

During the year ended 30 June 2024, the Group recognized USD 49,042 thousand of revenue related to the contract liabilities as of 30 June 2023

(2023: USD 11,528 thousand), which related to advances.

21. Other Financial Liabilities

The balances of other financial liabilities were as follows:

As of

30 June 2024

As of

30 June 2023

Share-based options (Note 34)

66,241

—

Payable for legal claims (Note 35, 37)

16,502

40,558

Derivative financial instruments (Note 37)

10,446

18,327

Accounts payable for property, plant and equipment

5,896

5,587

Other current liabilities

2,129

4,136

Total

101,214

68,608

22. Borrowings

The balances of borrowings were as follows:

As of

30 June 2024

As of

30 June 2023

Short-term borrowings

163,979

211,261

Bank credit lines

147,529

652,273

Interest accrued on short-term borrowings

3,653

6,389

Bank overdrafts (Note 9)

Total

315,166

869,933

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The balances of bank credit lines in details by tranches were as follows:

Interest rate in range

Currency

Amount due

30 June 2024

Amount due

30 June 2023

Ukrainian subsidiary of European bank

7.75%

USD

35,000

—

Ukrainian bank

4.35% plus UIRD

UAH

23,348

—

Ukrainian bank

7.25%

USD

22,000

—

Ukrainian subsidiary of European bank

6.00%

USD

20,000

—

European bank

2.10% plus COF

USD

17,108

—

European bank

2.50% plus COF

USD

12,578

—

Ukrainian bank

7.00%

USD

10,000

—

Ukrainian subsidiary of European bank

6.75%

USD

4,500

—

Ukrainian subsidiary of European bank

6.50%

USD

3,000

—

European bank

from 2.30% to 3.50% plus LIBOR

USD

—

194,952

Ukrainian subsidiary of European bank

from 1.90% to 10.00%

USD

—

151,781

European bank

from 2.90% to 4.00% plus SOFR

USD

—

123,870

European bank

from 3.50% to 4.00% plus LIBOR

USD

—

63,063

Ukrainian subsidiary of European bank

from 13.50% to 22.00%

UAH

—

32,182

European bank

from 2.50% to 4.00% plus COF

USD

—

25,721

Ukrainian bank

7.00%

USD

—

19,142

Ukrainian bank

6.00% plus UIRD

UAH

—

18,230

Ukrainian bank

from 17.00% to 23.73%

UAH

—

16,435

European bank

from 2.20% to 2.97%

USD

—

6,907

Total

147,534

652,283

As of 30 June 2024, the Group classified its bank borrowings with long-term initial contractual maturity in the amount of USD 130,594 thousand as

short-term as the Group had waivers for technical and financial covenants for the period less than 12 months since reporting date. In addition, as

of 30 June 2024, the Group was not able to meet certain technical conditions specified in the loan agreements with two banks. They were duly

waived after the reporting date.

The balance of the borrowings with an initial contractual maturity of more than 12 months of 30 June 2024 is disclosed in the table below by

tranches:

Initial contractual

maturity

Interest rate in range

Currency

Amount due

30 June 2024

Amount due

30 June 2023

European bank

2030

from 3.03% to 3.10% plus SOFR

USD

71,137

—

European bank

2029

from 3.03% to 3.10% plus SOFR

USD

65,962

—

European bank

2027

4.50% plus SOFR

USD

23,040

—

European bank

2027

1.00%

USD

3,840

5,793

European bank

2030

from 2.77% to 2.84% plus LIBOR

USD

—

85,871

European bank

2029

from 2.77% to 2.84% plus LIBOR

USD

—

84,846

European bank

2027

4.50% plus LIBOR

USD

—

34,751

Total

163,979

211,261

As of 30 June 2024, the undrawn amount of bank borrowings amounted to USD 205,731 thousand including available facility amounts upon bank

credit lines and long-term financing (30 June 2023: USD 130,620 thousand).

As of 30 June, bank borrowings were secured as follows:

As of

30 June 2024

As of

30 June 2023

Property, plant and equipment (Note 15)

437,930

406,731

Inventory (Note 12)

—

191,186

Pledge deposits (Note 14)

—

122,703

Future sales receipts

—

49,165

Cash deposit (Note 14)

—

6,907

Ukrainian government bonds (Note 14)

—

1,092

Total

437,930

777,784

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

23. Lease liabilities

The following is the maturity analysis of lease payments under the lease agreements as of 30 June:

Maturity

As of

30 June 2024

As of

30 June 2023

Payable within one year

29,811

33,594

Payable in the second to fifth years

147,871

163,332

Payable after five years

215,448

247,574

Total

393,130

444,500

less

Future finance charges

(223,390)

(246,605)

Present value of lease obligations

169,740

197,895

less

Current portion

(27,206)

(31,160)

Lease obligations, long-term portion

142,534

166,735

24. Bonds issued

The balances of bonds issued were as follows:

Maturity

As of

30 June 2024

As of

30 June 2023

US 300,000 thousand 6.75% coupon bonds (issued October 2020)

October 2027

298,087

297,660

US 300,000 thousand 6.50% coupon bonds (issued October 2019)

October 2024

299,493

298,551

Total

597,580

596,211

As of 30 June 2024, the bonds are rated CC by both S&P and Fitch (30 June 2023: CCC), in line with the rating of the Ukrainian sovereign.

All the notes are unsecured, ranking equally with all existing and future senior unsecured indebtedness of the Company, and have been uncondi-

tionally and irrevocably guaranteed by designated Group subsidiaries on the joint and several basis to the maximum extent permitted by law.

All the bonds contain certain restrictive covenants that limit the ability of the Company and, where applicable, its restricted subsidiaries to create

or incur certain liens, make restricted payments, engage in amalgamations, mergers or consolidations, or combination with other entities; make

certain disposals and transfers of assets; and enter into transactions with affiliates.

As of 30 June 2024 and 2023, the Group did not have an unconditional right (within the meaning of paragraph 69 d) of IAS 1 Presentation of

Financial Statement) to defer settlement of its bonds for 12 months or longer as the effective bank waivers related to its loans covered period until

31 March 2025 and other factors (Note 22). Consequently, the Group therefore classified its long-term bonds as short-term. Nevertheless, man-

agement notes that, given the effective waivers from banks in place as of 30 June 2024, no cross-acceleration events of default under the bonds

were triggered as of that date, and the Group remained otherwise in full compliance with the terms of its bonds.

As of 30 June 2024, accrued interest on bonds issued was USD 7,612 thousand (30 June 2023: USD 7,612 thousand).

25. Income Tax

The Group operates globally and is subject to the tax laws and regulations of numerous tax jurisdictions and authorities as well as tax agreements

and treaties among these jurisdictions. The corporate income tax rate in Ukraine, where the main operations of the Group are located, was 18%

as of 30 June 2024 and 2023.

The majority of the Group’s companies involved in agricultural production pay the Unified Agricultural Tax (UAT) by the Tax Code of Ukraine. The

UAT is calculated by local authorities and is based on the area and valuation of the land used.

The components of income tax (expenses)/benefit were as follows:

For the year ended

30 June 2024

For the year ended

30 June 2023

Current income tax charge

(56,502)

(49,626)

Deferred tax benefit/(expenses) relating to the origination and reversal of temporary differ-

ences

13,078

(19,424)

Total income tax expenses recognized in the reporting period

(43,424)

(69,050)

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

Management

Report

Sustainability

Report

Corporate

Governance

Financial

Statements

The income tax expenses is reconciled to the profit before income tax per the Consolidated Statement of Profit or Loss as follows:

As of

30 June 2024

As of

30 June 2023

Profit before income tax

211,052

367,824

Tax expenses at the Ukrainian statutory tax rate of 18%

(37,989)

(66,208)

Effect of income that is exempt from taxation (farming)

27,197

(18,225)

Effect of different tax rates of Subsidiaries operating in other jurisdictions

(13,973)

(18,459)

Effect of unused tax losses and tax offsets not recognized as deferred tax assets

2,356

(4,900)

Other expenditures not allowable for income tax purposes and non-taxable income, net

(21,015)

38,742

Income tax expenses

(43,424)

(69,050)

For the year ended 30 June 2024, deferred tax recognized in other comprehensive income was USD 1,784 thousand (for the year ended 30 June

2023: nil).

The primary components of the deferred tax assets and deferred tax liabilities were as follows:

As of

30 June 2024

As of

30 June 2023

Tax losses carried forward

20,304

17,112

Valuation of property, plant, and equipment

11,913

2,390

Valuation of inventories

2,367

10,257

Others

8,495

1,757

Deferred tax assets

43,079

31,516

Valuation of property, plant and equipment

(26,019)

(26,032)

Valuation of intangible assets

(1,209)

(1,525)

Others

(260)

(3,163)

Deferred tax liabilities

(27,488)

(30,720)

Net deferred tax assets

15,591

796

As of 30 June 2024, deferred tax assets in the amount of USD 31,166 thousand are expected to be recovered or settled within twelve months after

the reporting period (30 June 2023: USD 29,126 thousand).

As of 30 June 2024, based upon projections for future taxable income over the periods in which the taxable temporary differences are anticipated

to reverse, management believes it is probable that the Group will realize the benefits of deferred tax assets of USD 20,304 thousand (2023:

USD 17,112 thousand) recognized concerning tax losses carried forward by the subsidiaries. The amount of future taxable income required to be

generated by the Subsidiaries to utilize the tax benefits associated with the tax loss carried forward is approximately USD 112,800 thousand (2023:

USD 95,067 thousand). However, the amount of the deferred tax asset considered realizable could be adjusted in the future if estimates of taxable

income are revised.

The Group does not recognize a deferred tax liability for all taxable temporary differences associated with investments in subsidiaries as it can

control the timing of the reversal of such temporary differences and it is probable that they will not reverse in the foreseeable future.

The Group has unrecognized deferred tax assets in respect of a significant accumulated amount of unused tax loss carried forward. The tax loss

carried forward expires in the period 2025-2041.

Certain deferred tax assets and liabilities have been offset following the Group’s accounting policy. The following is an analysis of the deferred tax

balances (after offset) as they are presented in the Consolidated Statement of Financial Position:

As of

30 June 2024

As of

30 June 2023

Deferred tax assets

35,626

21,353

Deferred tax liabilities

(20,035)

(20,557)

Net deferred tax assets

15,591

796

26. Revenue

The Group’s revenue was as follows:

For the year ended

30 June 2024

For the year ended

30 June 2023

Revenue from edible oils sold in bulk, and meal

1,962,251

1,891,335

Revenue from agriculture commodities merchandising

1,412,005

1,347,681

Revenue from bottled sunflower oil

105,040

139,652

Revenue from transshipment services

48,917

34,904

Revenue from farming

42,054

35,074

Revenue from grain silo services

11,195

6,475

Total

3,581,462

3,455,121

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Revenue is obtained principally from the sale of commodities, recognized once the control of the goods has transferred from the Group to the

customer. Revenue derived from freight, storage, and other services, presented in the line Revenue from edible oils sold in bulk, and meal, is

recognized over time as the service is rendered. Disaggregated revenue for each reportable segment is presented in Note 7.

For the year ended 30 June 2024, the revenue from selling electricity, included within Revenue from edible oils sold in bulk, and meal used line,

amounted to USD 39,866 thousand (2023: USD 21,894 thousand).

The transaction price allocated to outstanding performance obligations as of 30 June 2024 is USD 10,046 thousand (30 June 2023:

USD 17,554 thousand). This amount represents revenue from carriage, freight, and insurance services under CIF/CFR Incoterms contracts which

are to be executed in July 2024, when the goods are delivered to the point of destination and under which the Group has already recognized

revenue from the sale of goods at a point in time as of 30 June 2024.

27. Cost of Sales

The cost of sales was as follows:

For the year ended

30 June 2024

For the year ended

30 June 2023

Cost of goods for resale and raw materials used

2,069,486

1,941,524

Shipping and handling costs

639,819

596,855

Amortization and depreciation

98,863

100,378

Payroll and payroll-related costs

80,791

65,257

Total

2,888,959

2,704,014

For the year ended 30 June 2024 result on operations with commodity futures, options and unrealized forwards, included within the Cost of goods

for resale and raw materials used line, decreased Cost of sales in the amount of USD 137,656 thousand (30 June 2023: USD 65,095 thousand

decrease).

28. Other Operating Income and Expenses

Other operating income and expenses were as follows:

For the year ended

30 June 2024

For the year ended

30 June 2023

Other operating income

Insurance reimbursement

33,539

13,982

Gain on operations with securities

9,120

4,190

Stock-take

8,428

9,224

Gain on sale of foreign currency

7,796

15,884

Contracts wash-out (price difference settlement)

5,142

5,791

Other operating income

7,046

4,476

Total

71,071

53,547

Other operating expenses

Other dispatch fees and fines

(17,418)

(24,185)

Loss on operations with derivatives

(5,465)

(10,682)

Total

(22,883)

(34,867)

In October 2023, the Group received a one-off insurance payment for property damage and business interruption due to the war in a total amount

of USD 32,579 thousand.

The Group enters wash-out contracts to reduce administrative time and costs, these contracts can be offset based on a mutual agreement with the

same partners who sold or purchased commodities.

29. General, administrative and selling expenses

General, administrative and selling expenses were as follows:

For the year ended

30 June 2024

For the year ended

30 June 2023

Payroll and payroll related costs

176,151

163,417

Audit, legal and other professional fees

10,317

12,096

Repairs and material costs

6,120

7,271

Amortization and depreciation

5,841

4,409

Business trip expenses

3,362

3,957

Taxes other than income tax

3,042

2,319

Other expenses

8,540

11,550

Total

213,373

205,019

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Audit, legal and other professional fees for the year ended 30 June 2024 included the auditor’s remuneration in the amount of USD 778 thousand

and remuneration for non-audit services was USD 26 thousand (for the year ended 30 June 2023: USD 781 thousand and nil thousand, respec-

tively). No consultancy services were provided by the auditors for the years ended 30 June 2024 and 2023.

30. Loss on Impairment of Assets

Loss on impairment of assets were as follows:

For the year ended

30 June 2024

For the year ended

30 June 2023

Impairment and reversal of property, plant and equipment (Note 15)

117,115

—

Impairment loss of goodwill (Note 18)

58,436

—

Impairment of prepayments to suppliers and other current assets

25,596

—

Impairment of intangible assets (Note 17)

23,728

Write-offs of property, plant and equipment (Note 15)

11,162

1,438

Allowance and write-offs of inventories (Note 12)

2,791

5,760

Impairment loss on right-of-use assets (Note 16)

—

Impairment loss on crypto assets

—

2,412

Impairment of assets classified as held for sale

—

26,039

Reversal of loss on impairment of inventories

(4,136)

(29,528)

(Reversal of impairment)/write-off of VAT allowance (Note 20)

(5,538)

8,530

Total

229,226

14,733

31. Finance Costs and Income

Finance costs and income were as follows:

For the year ended

30 June 2024

For the year ended

30 June 2023

Finance costs expensed

Interest expense on bank loans (Note 9)

(45,667)

(75,605)

Interest on corporate bonds (Note 9)

(39,750)

Interest on lease liabilities (Note 9)

(25,243)

(35,180)

Other finance costs

(8,419)

(2,714)

Total

(119,079)

(153,249)

Finance income

Interest received on financial assets held for cash management

42,553

28,128

Gain on modification of loan terms

6,436

—

Other financial income

830

2,664

Total

49,819

30,792

32. Foreign exchange gain, net

For the year ending 30 June 2024, the net foreign exchange gain amounted to USD 32,972 thousand (30 June 2023: USD 62,650 thousand). This

result is primarily attributed to the fluctuations in exchange rates, impacting the revaluation of balances denominated in currencies other than the

functional currency. These balances include trade balances, VAT, and borrowings (including intra-group balances where the Company's subsidi-

aries operate with different functional currencies and engage in intercompany financing, which, upon revaluation, can result in foreign exchange

gains or losses for one of the Company's subsidiaries if they use different functional currencies).

33. Other Expenses, net

Other expenses, net was as follows:

For the year ended

30 June 2024

For the year ended

30 June 2023

Social spending

(25,129)

(12,279)

Fines and penalties

(5,746)

(3,020)

Gain/(loss) on disposal of property, plant and equipment

530

(621)

Gain on disposal of Subsidiaries (Note 8)

2,448

4,091

Other expenses

(1,191)

—

Total

(29,088)

(11,829)

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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34. Transactions with Related Parties

As of 30 June 2024 and 2023, the Group is controlled by the Namsen Ltd (Note 2).

The Group had the following balances outstanding with related parties from sales or purchases of goods and services:

Related party

Statement of Financial Position line

Related party balances

as of 30 June 2024

Related party balances

as of 30 June 2023

Entities under Common

control

Trade accounts receivable, net

23,303

13,776

Prepayments to suppliers and other current assets

47,112

41,798

Other financial assets

2,327

104,319

Non-current financial assets

12,961

—

Trade accounts payable

1,968

26,922

Advances from customers and other current liabilities

18,177

—

Key management

Other financial assets

4,997

3,546

Non-current financial assets

1,430

124

Advances from customers and other current liabilities

11,166

20,345

Other financial liabilities

66,279

—

Other non-current liabilities

—

54,278

Entities under Key

Management control

Other financial assets

115

18,250

Non-current financial assets

1,984

—

Other related parties

Trade accounts receivable, net

39,563

Prepayments to suppliers and other current assets

944

747

Other financial assets

12,086

4,419

Non-current financial assets

2,032

8,563

Trade accounts payable

—

18,746

In July 2023, the Group received the remaining consideration of USD 90,000 thousand from a related party for the disposal of farming entities,

completed as of 3 March 2023 presented within the line Other financial assets and it is due from the Entities under Common control as of

30 June 2023 (Note 8, 14).

As of 30 June 2024, the fair value of liability recognized in terms of share options amounted to USD 66,241 thousand presented within Other

financial liabilities (30 June 2023: USD 54,278 thousand presented within Other non-current liabilities). The option exercise period is set for a period

commencing on 1 November 2024 and expiring on 31 December 2026. During the year ended 30 June 2022, a new management incentive plan

was introduced, according to which the Company granted management the option to sell to the Company 2,792,435 of its ordinary shares. The

consideration for each share will be a minimum of (i) USD 23.80 and (ii) operating profit before working capital changes minus interest paid plus

interest received minus interest tax paid minus maintenance capital expenditures in the fixed amount of USD 155,000 thousand, where all amounts,

except for the maintenance capital expenditures, are specified in USD as appropriately classified and disclosed in the consolidated statement of

cash flows of the audited annual consolidated accounts of the Company and its subsidiaries for the Financial Years 2022-2024, divided by three

divided by 12% and divided by 84,031,230. The option exercise period is set for a period commencing on 1 November 2024 and expiring on 31

December 2026.

Transactions with related parties are performed on terms equivalent to those that prevail in arm’s length transactions. The amount of outstanding

balances is unsecured and will be settled in cash. There have been no guarantees provided or received for any related party receivables or

payables. Loans are provided at rates comparable to the average commercial rate of interest.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Transactions with related parties were as follows:

Related party

Statement of Profit and Loss line

Related party transac-

tion for the year ended

30 June 2024

Related party transac-

tion for the year ended

30 June 2023

Entities under common

control

Revenue

50,889

7,010

Purchases of various goods and services

(228,982)

(35,977)

Cost of sales

(17,184)

—

Other operating expenses

(2,839)

—

Net impairment losses on financial assets

(7,595)

—

Entities under Beneficial

Owner control

Revenue

—

16,161

Purchases of various goods and services

—

(56,694)

Cost of sales

—

(10,356)

Key management

General, administrative and selling expenses

(39,630)

(40,151)

Financial costs

(1,638)

—

Entities under Key Man-

agement control

General, administrative and selling expenses

(20)

(820)

Finance costs

(3,100)

—

Other related parties

Revenue

20,883

72,300

Cost of sales

(40)

(611)

Purchases of various goods and services

(3,333)

(3,621)

Other operating income

—

8,045

General, administrative and selling expenses

(7)

(1,639)

Finance income

1,621

1,687

Net impairment losses on financial assets

(994)

—

Remeasurement of liability related to options provided to key management as of 30 June 2024 resulted in a loss recognized in General, adminis-

trative, and selling expenses in the amount of USD 11,963 thousand (30 June 2023: a loss of USD 18,158 thousand recognized as a decrease in

General, administrative and selling expenses).

During the year ended 30 June 2024, the Group sold goods to third parties in transactions involving a related party, being entity under common

control, recognizing respective sales at market terms amounting to USD 88,950 thousand (2023: nil).

The Group's key management personnel are the members of the Board of Directors and management team. The remuneration of Directors and

other members of key management personnel recognized in the Consolidated Statement of Profit and Loss and Other Comprehensive Income

including salaries and other current employee benefits amounted to USD 27,554 thousand (for the year ended 30 June 2023: USD 21,065 thou-

sand).

35. Commitments and Contingencies

Retirement and Other Benefit Obligations

Employees of the Group receive pension benefits from the government under the laws and regulations of Ukraine. The Group’s contributions to

the State Pension Fund for the year ended 30 June 2024 were USD 20,976 thousand (2023: USD 15,395 thousand).

As of 30 June 2024 and 2023, the Group was not liable for any significant supplementary pensions, post-retirement health care, insurance benefits,

or retirement indemnities to its current or former employees.

Capital Commitments

As of 30 June 2024, the Group had commitments under contracts with a group of suppliers for a total amount of USD 17,833 thousand, mostly for

the construction of the oil-crushing plant (30 June 2023: USD 21,749 thousand, mostly for the construction of the oil-crushing plant).

Contractual Commitments on Sales

As of 30 June 2024, the Group had entered into commercial contracts for the export of 672,500 tons of grain, 186,243 tons of sunflower oil, and

40,440 tons of sunflower meal and other related products, corresponding to an amount of USD 166,595 thousand, USD 184,097 thousand and

USD 10,924 thousand, respectively, in contract prices as of the reporting date.

As of 30 June 2023, the Group had entered into commercial contracts for the export of 103,000 tons of grain, 157,545 tons of sunflower oil, and

129,373 tons of sunflower meal and other related products, corresponding to an amount of USD 25,751 thousand, USD 149,280 thousand and

USD 43,838 thousand, respectively, in contract prices as of the reporting date.

Taxation and Legal Issues

The international tax environment is becoming more complex in terms of tax administration, which could increase tax pressure on taxpayers. In

particular, a key part of the OECD/G20 BEPS Project is addressing the tax challenges arising from the digitalization of the economy. The Global

Anti-Base Erosion Rules (‘GloBE’) are a key component of this plan and ensure large multinational enterprises pay a minimum level of tax on the

income arising in each of the jurisdictions where they operate. More specifically, the GloBE Rules provide for a coordinated system of taxation that

imposes a top-up tax on profits arising in a jurisdiction whenever the effective tax rate, determined on a jurisdictional basis, is below the minimum

rate. Kernel Holding S.A. belongs to the Kernel Group which is within the scope of the OECD Pillar Two Model Rules. Pillar Two legislation was

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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enacted in Luxembourg, the jurisdiction in which Kernel Holding S.A. is incorporated, which has come into effect for fiscal years starting on or after

31 December 2023. However, it was determined in terms of Pillar 2 rules that Namsen Limited residing in Cyprus should be considered as the

Ultimate Parent Entity of the Kernel Group and should therefore have the obligation to apply the Income Inclusion Rule and be charged with the

top-up tax (TUT) due on any low-taxed profits of itself and its low-taxed subsidiaries. Cyprus has not yet transposed the rules into the domestic

legislation but is expected to do so in the course of 2024 with retroactive effect as of 31 December 2023, in line with the requirements of the EU

Directive, and will therefore be effective for the Kernel Group from 1 July 2024. Since the Pillar Two legislation will not be effective at the closing

date of the financial year, Kernel Group will not have related current tax exposure. Due to the complexities in applying the legislation and calculating

GloBE income, the quantitative impact of the enacted legislation cannot yet be reasonably estimated. Kernel Group is currently engaged with

advisors to confirm the modalities of the application of the legislation.

Tax risk management is embedded in overall Group risk management. As of 30 June 2024, companies of the Group had ongoing litigations with

the tax authorities concerning tax issues for USD 20,441 thousand (as of 30 June 2023: USD 65,803 thousand). Management believes that based

on the past history of court resolutions of similar lawsuits by the Group, it is unlikely that a significant settlement will arise out of such lawsuits and

no respective provision is required in the Group’s financial statements as of the reporting date.

Ukraine’s tax environment is characterized by complexity in tax administration and arbitrary interpretation by tax authorities of tax laws and regu-

lations that could increase fiscal pressure on taxpayers. Inconsistent application, interpretation, and enforcement of tax laws can lead to lawsuits

resulting in the imposition of additional taxes, penalties, and penalty interest.

The transfer pricing legislation provides for the possibility of additional tax assessment for controlled transactions (transactions between related

parties and certain transactions between unrelated parties) if such transactions are not on an arm’s-length basis. The management has imple-

mented internal controls to comply with current transfer pricing legislation. Tax liabilities arising from controlled transactions are determined based

on their actual transaction prices. Potentially, with the evolution of the interpretation of transfer pricing rules, such prices could be challenged.

However, the impact of any such challenge is uncertain and cannot be reliably estimated.

Key aspects of the Ukrainian tax system are the following:

• Ukraine operates a classic corporate income tax system, under which taxable profit of companies (i.e., financial profit adjusted by tax differences)

is subject to 18% corporate income tax (‘CIT’).

• Transfer pricing rules apply to transactions with related non-residents and “low tax” non-residents (i.e., non-residents, taxed domestically at a

significantly lower corporate income tax rate than the Ukrainian tax rate of 18%), subject to a company’s minimum income threshold of UAH 150

million and turnover threshold with each separate non-resident of UAH 10 million.

• Domestic supply of goods and services, as well as the import of goods and certain services, are subject to value-added tax at the standard rate

of 20%. A reduced tax rate of 0% applies to the export of goods from Ukraine. Starting from March 2021, also 14% tax rate applies to the

domestic supply and import of certain agricultural commodities.

• Payment of passive income (i.e., interest, royalties, dividends, etc.) to non-residents is subject to withholding tax at a standard 15% rate unless

double tax treaties or the Tax Code of Ukraine provide another tax rate.

• Agricultural producers of raw materials are allowed to apply a simplified tax system, given that at least 75% of their income is attributable to sales

of agricultural raw materials produced by such company. Under the simplified tax system, companies are subject to a fixed tax, which depends

on the type, location, and monetary value of farmland used by such companies.

• In March 2022 significant changes to the Tax Code of Ukraine have been introduced as a result of the war and adoption of Marital Law in Ukraine.

Amongst others, these changes released the taxpayers from financial liability for any tax and other violations of legislation, the compliance with

which is monitored by the customs and tax authorities, if such violations occur as a result of the force majeure circumstances (the war following

the military aggression of the Russian Federation). At the same time, such obligations must be fulfilled immediately after the termination of the

force majeure circumstances. The Law has also temporarily suspended certain types of tax audits, including transfer pricing audits. Since August

2023, other laws have been enacted that restore the obligations of taxpayers and the right of tax authorities to initiate tax audits with the right to

review the list of taxpayers that are subject to tax audits monthly.

• The Diia City regime providing special tax benefits for IT companies was adopted in Ukraine. Among other novelties, this regime introduces

certain protection from excessive interference from state bodies and control over IT business, simplification of formalities with hiring IT specialists

(including special “gig contracts”), and reduced income tax and payroll tax rates for qualifying IT businesses.

The Company is currently a party to five legal cases in the District Court in Luxembourg, all initiated by eight shareholders who together held

1,210,430 shares as of February 2024, amounting to 0.4% of the Company's total issued shares:

• merits proceedings initiated on 13 October 2023 with the objective: 1) To establish that the Company's directors acted against the Company's

interests, were conflicted, and lacked the necessary authority at the Board of Directors' meeting on 13 April 2023; 2) To invalidate all decisions

made during the aforementioned Board meeting, including the resolution to delist the Company from the Warsaw Stock Exchange; 3) Alterna-

tively, to appoint an expert to assess (i) the fairness of the public tender offer price announced by Namsen Limited on March 30, 2023, compared

to the real value of the Company, and (ii) the economic impact of the Board of Directors' decisions, including the delisting, on the Company's

corporate interests.

• summary proceedings initiated on 20 February 2024 related to the temporary suspension of decisions made by the Company's Board of Directors

on 21 August 2023 (regarding the initiation of a share offering), and on 1 September 2023 (pertaining to the issuance of 216,000,000 new shares

in the context of the increase in share capital following subscriptions received by certain shareholders in response to the share offering). Addi-

tionally, the claimants seek to suspend all actions taken by Namsen Limited, the Company's largest shareholder, following the capital increase,

including the suspension of its voting rights related to the shares acquired thereafter.

• merits proceedings initiated on 20 February 2024 related mainly to the annulment of the Board of Directors' decisions made on 21 August and

1 September 2023, as mentioned above. Alternatively, the claimants seek compensation for damages from Namsen Limited.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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• summary proceedings initiated on 3 April 2024 related mainly to the suspension of the decisions taken at the AGM held on 11 December 2023.

• merits proceedings initiated on 26 April 2024 related mainly to the annulment of the decisions taken at the AGM held on 11 December 2023.

It is an early stage of the proceedings, and the outcome of the litigation cannot be assessed at the moment. However, the management of the

Group believes there was no non-compliance with laws and regulations with regard to the facts appealed by the claimants.

36. Financial risk management

Capital Risk Management

The Group manages its capital, which is attributable to equity holders to ensure that entities in the Group will be able to continue as a going concern

so that they can continue to provide returns for shareholders and benefits for other stakeholders and maintain an optimal capital structure to reduce

the cost of capital. Management considers the cost of capital and risks associated with each class of capital. The Group balances its overall capital

structure through the payment of dividends, new share issues, repurchase of own shares as well as the issue of new debt or the redemption of

existing debt. The Group monitors capital based on the carrying amount of equity, borrowings less cash and cash equivalents as presented in the

statement of financial position.

The Group is not subject to any externally imposed capital requirements, except for bank borrowing and bonds covenants imposed by external

lenders.

Gearing Ratio

The Group measures its capital by calculating a gearing ratio, defined as net debt divided by total capital. Net debt represents the obligation under

financial lease, bonds and borrowings less cash and cash equivalents, while total capital includes equity from the consolidated balance sheet and

net debt. The Group has not yet settled on an optimal gearing ratio. Presently, most of the debt is due within 2-5 years, and the Group is proactively

looking to extend these credit terms in line with its long-term strategy.

As of

30 June 2024

As of

30 June 2023

Debt liabilities

(Notes 22, 23, 24)

1,090,098

1,671,651

Less cash and cash equivalents (Note 9)

(809,584)

(954,103)

Net debt

280,514

717,548

Equity

1,864,643

1,741,857

Total capital

2,145,157

2,459,405

Net debt liabilities to capital

15.0%

41.2%

Financial Risk

The Group is exposed to financial risk as the result of the normal course of business and includes the following risks:

• Credit risk

• Liquidity risk

• Market risk

Risk management policies have been established to identify, assess, and analyze the risks faced by the Group, to manage and continuously

improve an effective risk management and monitoring system, spreading the culture of decision-making in terms of risks, their valuation and

likelihood of occurrence. The Group coordinates roles and participants through training, management standards, and procedures.

Credit Risk

Credit risk is the risk of financial loss to the Group if counterparties may not be able to settle their contractual obligations due to the Group within

their agreed payment terms.

The Group’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. The characteristics of the Group’s

customer base, including the default risk of the industry and country in which the major customers operate, have less of an influence on credit risk.

The management of the Group has established a credit policy under which each new customer is analyzed individually for creditworthiness before

the Group’s standard payment and delivery terms and conditions are offered. The Group’s review includes an assessment of the credit quality of

the customer, considering its financial position, payment history, transaction volume, and other factors. Sales limits are established for each cus-

tomer, which represent the maximum open amount without requiring approval from the management of the Group. These limits are reviewed

annually. Customers who fail to meet the Group’s benchmark for creditworthiness may only conduct transactions on a prepaid basis and are subject

to an additional level of agreement approval. To reduce non-payment risk in international markets, the Group presents title documents via banking

channels and uses payment instruments such as letters of credit, insurance arrangements, and bank guarantees. The Group holds collateral

against loans provided to farmers, consisting of future harvests, encumbrances on movable property, and immovable property. The collateral is

secured in quantities sufficient to cover the loans, based on the current market price. The Group’s applied policy about expected credit losses is

disclosed in Note 10 for all trade receivables. Other financial assets at amortized cost include loans to related parties, key management personnel,

and other receivables that have a low credit risk.

Debt includes short-term and long-term borrowings, obligations under finance leases, bonds issued and accrued interest. Debt liabilities do not include the liabilities associated with assets held for sale.

Equity includes issued capital, share-premium reserve, additional paid-in capital, revaluation reserve, equity-settled employee benefits reserve, retained earnings, other reserve and translation reserve

attributable to Kernel Holding S.A. shareholders.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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The Group’s most significant customer is an international customer, who accounted for USD 31,643 thousand out of total trade accounts receivable

as of 30 June 2024 (30 June 2023: one international customer accounted for USD 39,440 thousand).

The entity is also exposed to credit risk to debt investments in government bonds that are measured at fair value through profit or loss. Government

bonds are represented by bonds issued by the Ukrainian government and the credit rating of Ukraine has been downgraded since the beginning

of the war.

As of 30 June 2024, 59% (30 June 2023: 81%) of margin accounts with brokers and derivative financial instruments balances are conducted with

the financial institutions rated at F1-B by Fitch (or analog). Short-term bank deposits and pledge deposits are held by the Group in the international

banks and Ukrainian subsidiaries of international banks with high ratings (F1+ - F by Fitch). The Group’s exposure to credit risk for derivative

financial instruments and margin accounts with brokers is significantly reduced by placing them with financial institutions that hold a strong Fitch

credit rating of 'B' or above, reflecting a high level of creditworthiness.

Liquidity Risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group manages liquidity risk by

maintaining adequate cash and cash equivalents, as well as the availability of funding through the adequacy of the banking facilities by continuously

monitoring forecasted and actual cash flows and by matching the maturity profiles of financial assets and liabilities. Management diversifies funding

sources to ensure that sufficient liquidity is maintained to meet liquidity requirements.

As of 30 June 2024, the carrying amount of the Group’s maximum exposure to financial obligations (including lease liabilities) was

USD 1,301,970 thousand (30 June 2023: USD 1,953,904 thousand).

The following table details the Group’s remaining contractual maturity for its non-derivative financial liabilities with agreed repayment periods as of

30 June 2024 and 2023. The table has been drawn up based on the undiscounted cash flows of financial liabilities based on the earliest date on

which the Group can be required to pay. The tables include both interest and principal cash flows.

Carrying

amount

Contractual

cash flows

Less than 1

year

1–2 years

2–5 years

More than 5

years

30 June 2024

Non-derivative financial liabilities

Trade accounts payable

109,672

(109,672)

—

Borrowings (Note 22)

315,166

(315,166)

—

Bonds issued (Note 24)

605,192

(605,192)

—

Other financial liabilities (Note 21)

90,768

(90,768)

—

Other non-current liabilities

986

(986)

—

(493)

—

Total

1,121,784

(1,121,784)

(1,120,798)

(493)

—

Derivatives

Derivative financial instruments (Note 21)

10,446

(10,446)

—

Total

10,446

(10,446)

—

30 June 2023

Non-derivative financial liabilities

Trade accounts payable

158,567

(158,567)

—

Borrowings (Note 22)

869,933

(869,933)

—

Bonds issued (Note 24)

603,823

(603,823)

—

Other financial liabilities (Note 21)

50,281

(50,281)

—

Other non-current liabilities

55,078

(55,078)

—

(54,678)

(400)

—

Total

1,737,682

(1,737,682)

(1,682,604)

(54,678)

(400)

—

Derivatives

Derivative financial instruments (Note 21)

18,327

(18,327)

—

Total

18,327

(18,327)

—

The concentration of liquidity risk is limited due to different repayment terms of financial liabilities and sources of borrowing facilities.

Market Risk

The Group`s activities expose it primarily to market risk which is mainly presented as the risk of loss in the value of any financial instrument due to

an adverse fluctuation in market prices, interest rates, and foreign exchange rates, whether arising out of factors affecting specific instruments or

the market in general. The goal of market risk management is to control and manage market risk exposures within acceptable limits while maxim-

izing the return on those risks.

Currency Risk

The functional currency of the majority of the Group’s Subsidiaries is their local currency, except for businesses engaged in the production and

sale of sunflower oil and transshipment services, for which USD was selected as the functional currency.

Currency risk is a risk of financial impact due to exchange rate fluctuations related to transactions and balances in currencies other than functional

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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currency. The Group enters into such transactions denominated in other currencies, which include capital expenditures, operating expenses, certain

sales of goods, and recognized assets and liabilities denominated in a currency that is not the functional currency of the entity. Exposure of currency

risk is managed by utilizing currency forward contracts and fulfilling comparative analysis between subsidiaries.

Management of the Group mitigates the influence of currency risk in Ukrainian hryvnia through export sales expressed in USD and EUR: for the

year ended 30 June 2024, out of total sales denominated in USD sales in the amount of USD 3,250,287 thousand, and denominated in EUR sales

were in the amount of USD 64,367 thousand (2023: USD 3,070,642 thousand and USD 87,156 thousand, respectively).

The Group makes use of currency swaps, which are financial derivative contracts where two parties agree to exchange principal and interest

payments in different currencies. These swaps serve a dual purpose: primarily, they help manage exposure to foreign exchange risk by mitigating

potential losses from currency fluctuations. Additionally, they enable the Group to secure more favorable borrowing rates compared to what might

be available in their domestic markets. The risk related to currencies other than the functional currency, arising from the Group’s non-US dollar-

denominated debts, was settled through the US dollar payment leg of these swaps.

Interest and principal on borrowings are denominated in currencies that match the cash flows generated by the underlying operations of the Group,

primarily in USD. This provides the Group with a natural hedge against currency risk and no derivatives are required to cover such risk.

The table below covers UAH and USD-denominated assets and liabilities carried by Subsidiaries having balances in currencies other than functional

currencies.

The Group’s exposure to foreign currency risk, including the balances outstanding between the Group’s companies as of 30 June 2024 and 2023

was as follows:

30 June 2024

30 June 2023

UAH

USD

UAH

USD

Cash and cash equivalents

132,254

163,471

36,175

37,353

Trade accounts receivable

50,856

94,427

75,764

61,198

Other financial assets

177,655

—

14,966

—

Trade accounts payable

(69,585)

(1,320)

(64,049)

(519)

Other financial liabilities

(277,303)

(642)

(323,763)

—

Current portion of lease liabilities (Note 23)

(644)

—

(739)

(121)

Other non-current liabilities

(3,081)

—

(368)

—

Borrowings from Ukrainian subsidiary of European bank (Note 22)

—

(27,654)

—

Borrowings from Ukrainian bank (Note 22)

—

(16,760)

—

Borrowings European Bank (Note 22)

—

(12,628)

—

(15,720)

Lease liabilities (Note 23)

(6,855)

—

(7,333)

—

Net exposure

3,297

243,308

(313,761)

82,191

The following table details the Group’s sensitivity to a 10 % change of the UAH against the USD would prompt a fluctuation in the equity and profit

and loss account by the amounts shown below. This sensitivity analysis assumes that all other variables, in particular interest rates, remain con-

stant. The sensitivity analysis includes only outstanding monetary items denominated in a currency other than the functional currency.

A strengthening/depreciation of the UAH against USD on 30 June would have affected the measurement of financial instruments denominated in

a foreign currency and affected profit or loss before income tax by the amounts shown below:

30 June 2024

30 June 2023

Strengthening

Depreciation

Strengthening

Depreciation

UAH (10% movement)

(21,789)

26,705

(38,848)

40,508

Interest Rate Risk

The Group’s main interest rate risk arises from bank borrowings and lease liabilities with variable rates, which expose the group to cash flow interest

rate risk.

The sensitivity analysis in the table below has been determined based on exposure to interest rates for financial liabilities at the end of the reporting

period. For floating rate liabilities, the analysis was prepared assuming the amount of liability outstanding at the end of the reporting period was

outstanding for the whole year. A 100-basis point ('bp') increase, or decrease, was used when reporting interest rate risk internally to key manage-

ment personnel and represents management’s assessment of reasonably possible changes in interest rates.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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The interest rate profile of the Group’s interest-bearing financial instruments and its sensitivity to increase or decrease of variable interest rate was

as follows:

Carrying

amount

as of

30 June 2024

Gain/(loss) on profit for the year (be-

fore income tax) due to change of

variable rate

Carrying

amount as of

30 June 2023

Gain/(loss) on profit for the year (be-

fore income tax) due to change of

variable rate

100 bp higher

100 bp lower

100 bp higher

100 bp lower

Fixed rate

873,561

—

1,034,904

—

Variable rate

216,538

(2,166)

2,166

636,752

(6,369)

6,369

SOFR

162,157

(1,622)

1,622

124,074

(1,241)

1,241

COF

29,686

(297)

297

26,558

(266)

266

UIRD

23,738

(237)

237

18,666

(187)

187

LIBOR

957

(10)

467,454

(4,675)

4,675

Total

1,090,099

(2,166)

2,166

1,671,656

(6,369)

6,369

As of 30 June 2024, the Group completed its transition to new interest rate benchmarks following the global phase-out of LIBOR. Specifically, all

USD LIBOR-based contracts were transitioned to the Secured Overnight Financing Rate (SOFR) upon the LIBOR cessation date. The transition

was carried out smoothly, ensuring minimal disruption to existing financial agreements and maintaining alignment with market standards. This

change reflects the Group’s commitment to adhering to regulatory requirements and adopting more robust and transparent benchmark rates,

thereby reducing exposure to potential volatility in legacy rates.

The Group does not use any derivatives to manage interest rate risk exposure. The Group manages its interest rate risk by having a balanced

portfolio of fixed and variable-rate loans and borrowings.

Commodity Price Risk

The Group is exposed to fluctuations in commodity prices for inventories and the product of production which are not held to meet forward priced

contracts.

In the marketing year 2024, the Group withstood a period of volatile markets and relatively low prices across main agricultural commodities,

remaining exposed to war-induced limitations but to a lesser extent compared to the previous year. During Q1 (July–September 2023), we tested

the limits of river barge logistics by ramping up export flows and optimizing both throughput and costs. This resulted in increased efficiency and

cost savings, giving us confidence in our capability to maintain a sufficient pace of exports of oilseed crush products matching the Group’s pro-

cessing capacity. To a certain extent, this also applied to grains and oilseeds we farm, in case of temporary unavailability of deep-water Black Sea

port navigation.

The opening and acceleration of shipments via the Black Sea later in the season and for the prevailing part thereof allowed for better predictability,

planning of trading books, and market risk management. As exports from Ukraine normalized, there was higher confidence in Ukrainian-origin

supply chains from the main regions of consumption.

A gradual decrease in freight premiums for Ukrainian Black Sea ports vis-à-vis the ports of Constanta and Varna, along with a similar trend in

insurance premiums, contributed to the Group’s bottom line and made our trade flows more agile and responsive to dynamic market changes.

From Q2 onwards, trading of vegetable oils was fine-tuned to changing parities between EU and Asian destinations. The Group's activities, primarily

in the markets of India and the European Union - almost equally distributed between the Mediterranean and Northern EU - allowed us to manage

exposure from both price environment and freight standpoints in a balanced manner. We became self-sufficient in vegetable oils throughput by

utilizing two vegetable oil port terminals under our ownership, keeping operational risks under control while minimizing costs related to vessel

demurrage. This also enhanced our trading book by introducing another layer of optimization through rhythmic shipments and port stock manage-

ment. Carefully crafted trading of all the main products we manage allowed for moderate positions with a focus on cost reduction, book optimization,

and arbitrage between destinations.

The Group measures and limits market risk exposure using a Value at Risk computation for commodity price risk related to its physical marketing

activities.

Value at Risk (VaR) is used by management as a tool for the estimation of potential loss in value of risk positions over a given time period under

normal market conditions. The Group calculates VaR over a one-day time horizon with a 95 percent confidence level. Limitations that may result

in the information not fully reflecting the fair value of the assets and liabilities involved: The Group uses a Parametric VaR model based on a Log-

Normal assumption of Returns. Parameters are estimated using an Exponentially Weighted Moving Average over a 75-day period with a 0.94

weight. The VaR model does not capture the liquidity of different risk positions and therefore does not estimate potential losses if the Group

liquidates large positions over a short period of time. The VaR is based on statistical analysis of historical market data which might not reflect

futures market prices. As of 30 June 2024, the Group`s marker risk VaR amounted to USD 6,100 thousand (30 June 2023: USD 5,063 thousand).

The Group’s VaR should be interpreted in light of the limitations of the methodologies used. These limitations include the following:

• The VaR model does not capture the liquidity of different risk positions and therefore does not estimate potential losses if the company liquidates

large positions over a short period.

• VaR is based on historical data that may not provide the best estimate of the joint distribution of risk factor changes in the future and may fail to

capture the risk of possible extreme adverse market movements that have not occurred in the historical window used in the calculations.

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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• Model Risk: VaR’s accuracy depends on the method and assumptions used for calculation. For instance, the parametric method assumes a

normal distribution, which may not hold in real markets

37. Financial Instruments

The following tables give information on the carrying and fair values of the financial instruments. Fair value is the price that would be received to

sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In the absence of market

values, fair values have been estimated by discounting expected cash flows at prevailing market interest and exchange rates. These estimated fair

values have been determined using market information and appropriate valuation methodologies but may not necessarily reflect the amounts that

the company could realize in the normal course of business.

As of 30 June 2024 and 2023, the financial assets and liabilities are presented by class in the tables below at their carrying values:

As of 30 June 2024

As of 30 June 2023

Amortized

cost

FVTPL

Total

Amortized

cost

FVTPL

Total

Assets

Cash and cash equivalents (Note 9)

809,584

—

809,584

954,103

—

954,103

Trade accounts receivable (Note 10)

305,246

—

305,246

321,579

—

321,579

Other financial assets (Note 14) of which

Margin account with brokers

82,215

—

82,215

65,993

—

65,993

Loans granted

22,306

—

22,306

41,092

—

41,092

Short-term bank deposits

12,747

—

12,747

7,127

—

7,127

Other financial assets

10,760

—

10,760

19,248

—

19,248

Pledge deposits

1,303

122,703

—

122,703

Receivables from disposal of subsidiary

—

90,000

—

90,000

Other financial assets (Note 14) of which

Government bonds

—

185,310

—

16,058

Derivative financial instruments

—

25,288

—

13,842

Non-current financial assets

23,307

—

23,307

25,524

—

25,524

As of 30 June 2024

As of 30 June 2023

Amortized

cost

FVTPL

Total

Amortized

cost

FVTPL

Total

Liabilities

Trade accounts payable

109,672

—

109,672

158,567

—

158,567

Borrowings (Note 22)

315,166

—

315,166

869,933

—

869,933

Bonds issued and interest accrued (Note 24)

605,192

—

605,192

603,823

—

603,823

Other financial liabilities (Note 21) of which

Payable for legal claims

16,502

—

16,502

40,558

—

40,558

Accounts payable for property, plant and equipmen

5,896

—

5,896

5,587

—

5,587

Other current liabilities

2,129

—

2,129

4,136

—

4,136

Other financial liabilities (Note 21) of which

Share-based options

—

66,241

—

Derivative financial instruments

—

10,446

—

18,327

Other non-current liabilities

986

—

986

800

54,278

55,078

The following table below represents a comparison of carrying amounts and fair value of the financial instruments for which they differ:

As of 30 June 2024

As of 30 June 2023

Financial liabilities

Carrying amount

Fair value

Carrying amount

Fair value

Bonds issued (Note 24)

605,192

484,290

603,823

365,250

Due to the defined short-term nature of the borrowings, as of 30 June 2024, their carrying amount is considered to be approximately the same as

their fair value. The fair value was calculated based on cash flows discounted using a current lending rate that is within level 2 of the fair value

hierarchy.

The fair value of Bonds issued was estimated based on directly observable quotations within Level 2 of the fair value hierarchy.

Derivative instruments are carried at fair value for which the Group evaluates the quality and reliability of the assumptions and data used to measure

fair value in the two hierarchy levels, Level 1 and 2, as prescribed by IFRS 13 Fair Value Measurement. Fair values are determined in the following

ways: externally verified via comparison to quoted market prices in active markets (Level 1) or by observable quoted prices sourced from exchanges

or brokers in active markets for identical assets or liabilities (Level 2).

FVTPL – Fair value through profit and loss.

Including accrued interests

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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Valuation of the Group’s commodity physical forward contracts categorized within level 2 is based on observable quoted prices sourced from

exchanges or traded reference indices in active markets for identical assets or liabilities and broker markups derived from observable quotations

representing differentials, as required, including geographic location and local supply and demand.

The following table below represents the fair values of the derivative financial instruments including trade-related financial and physical forward

purchase as of 30 June 2024 and 2023:

As of 30 June 2024

As of 30 June 2023

Level 1

Level 2

Total

Level 1

Level 2

Total

Other financial assets

Forwards

—

9,964

—

10,994

Futures/Options

15,324

—

15,324

2,848

—

2,848

Other financial liabilities

Forwards

—

9,224

—

13,302

Futures/Options

1,222

—

1,222

5,025

—

5,025

The major part of other financial liabilities has contractual maturity due within 6 months.

Cash and cash equivalents and short-term borrowings and government bonds are classified as level 2 fair values in the fair value hierarchy due to

the inclusion of directly and indirectly observable inputs. Trade receivables, other current assets and trade accounts payable, other current liabilities

are classified as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.

For the year ended 30 June 2024 and 30 June 2023, the fair value of other non-current assets recognized at amortized cost was estimated by

discounting the expected future cash outflows by a market rate of interest for bank borrowings of 5-10% that is within level 3 in the fair value

hierarchy due to the inclusion of unobservable inputs including counterparty credit risk.

There were no transfers between levels of the fair value hierarchy.

There were no changes in the valuation technique since the previous year.

Offsetting of financial assets and liabilities

Financial assets and liabilities are offset, and the net amount is presented in the statement of financial position when the Group has a legally

enforceable right to offset the recognized amounts and intends to either settle on a net basis or realize the asset and settle the liability simultane-

ously.

As of 30 June 2024, other financial assets include collaterals for derivatives in the amount of USD 76,049 thousand (30 June 2023:

USD 49,693 thousand). The cash collateral does not meet the offsetting criteria in IAS 32, but it can be set off against the net amount of the

derivative asset and derivative liability in the case of default and in accordance with associated collateral arrangements.

The financial assets and liabilities, which meet the criteria of offsetting as of 30 June 2024 were as follows:

Amounts set off in the statement of

financial position

Amounts not set off in the

statement of financial position

Total as presented

in the consolidated

statements of finan-

cial position

Gross amount

of financial

assets

Gross amount

of financial

liabilities

Net amount

Margin

account with

brokers

Not under master

netting

agreements

Derivative assets (Note 14)

89,652

(74,328)

15,324

—

9,964

25,288

Derivative liabilities (Note 21)

250,988

(252,300)

(1,312)

—

(9,224)

(10,536)

Margin account with brokers

(Note 14)

—

82,215

—

82,215

Total

340,640

(326,628)

14,012

82,215

740

96,967

The financial assets and liabilities, which meet the criteria of offsetting as of 30 June 2023 were as follows:

Amounts set off in the statement of

financial position

Amounts not set off in the

statement of financial position

Total as presented in

the consolidated

statements of finan-

cial position

Gross amount

of financial

assets

Gross amount

of financial

liabilities

Net amount

Margin

account with

brokers

Not under master

netting

agreements

Derivative assets (Note 14)

66,633

(63,785)

2,848

—

10,994

13,842

Derivative liabilities (Note 21)

7,281

(12,306)

(5,025)

—

(13,302)

(18,327)

Margin account with brokers

(Note 14)

—

65,993

—

65,993

Total

73,914

(76,091)

(2,177)

65,993

(2,308)

61,508

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The accompanying notes are an integral part of these financial statements.

Notes to the Consolidated Statements continued

for the year ended 30 June 2024 (in thousands of US dollars, unless otherwise stated)

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38. Earnings per Share

Basic earnings per share are computed by dividing net income from continuing and discontinued operations available to ordinary shareholders by

the weighted average number of ordinary shares outstanding (as of 30 June 2024 and 2023, 293,429,230 and 77,429,230 shares, respectively,

and the weighted average number of ordinary shares in the number of 256,839,066 and 77,429,230 shares for the periods then ended, respec-

tively), excluding any dilutive effects of stock options. Diluted earnings per share are computed in the same way as basic earnings per share,

except that the weighted average number of ordinary shares outstanding is increased to include additional shares from the assumed exercise of

stock options. The number of additional shares is calculated by assuming that outstanding stock options, except those that are not dilutive, were

exercised and that the proceeds from such an exercise were used to acquire ordinary shares at the average market price during the reporting

period. For calculating diluted earnings per share, as of 30 June 2024, an average number of 256,839,066 ordinary shares is considered

(30 June 2023: 77,429,230).

39. Subsequent Events

In August 2024, Russian drones attacked and damaged the largest oilseed processing plant in western Ukraine, launched in February 2024. The

attack caused an estimated USD 341 thousand damage to storage facilities and plant systems. An expert assessment will determine the exact

losses. The production capacity was unaffected, and the plant continues to operate at normal capacity.

In October 2024, the Company`s assets at the port of Chornomorsk were damaged due to a Russian drone attack on Ukraine's port infrastructure.

Fortunately, there were no casualties, and transshipment operations were not suspended.

As of 16 October 2024, the Group entered into a pre-export credit facility with a syndicate of European banks. The Facility provides a total available

limit of up to USD 150 million and matures on 1 August 2025, with the possibility of further extension.

In October Kernel Holding S.A. completed the scheduled redemption of its USD 300 million 6.5% coupon bonds due in 2024 (the ‘2024 Eurobonds’).

The Company has fully settled the principal amount along with accrued coupon payment in accordance with the terms specified in the 2024

Eurobonds prospectus. This action effectively discharges all of the Company's obligations toward the holders of 2024 Eurobonds.

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The accompanying notes are an integral part of these financial statements.

Corporate information

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Headquarters

3 Tarasa Shevchenka Lane,

Kyiv, Ukraine, 01001

Tel.: +38044 4618801

Fax: +38044 4618864

Registered office

Kernel Holding S.A.

9, rue de Bitbourg

L-1273 Luxembourg

Registered number

B109173

Auditors

PwC Société cooperative,

2, rue Gerhard Mercator B.P.

L-1014 Luxembourg

Investor relations

Mr. Yuriy Kovalchuk,

Corporate Investments Director

Mr. Michael Iavorskyi,

Investor Relations Manager

Ms. Anastasiia Nesterenko,

Investor Relations Specialist

ir@kernel.ua

3 Tarasa Shevchenka Lane,

Kyiv, Ukraine, 01001

Tel.: +38044 4618801, ext. 72-75

Kernel Holding S.A. Investor Calendar

Q1 FY2025 Operations Update

28 October 2024

Annual general shareholders’ meeting

10 December 2024

Q1 FY2025 Financial Report

13 December 2024

Q2 FY2025 Operations Update

20 January 2025

H1 FY2025 Financial Report

28 February 2025

Q3 FY2025 Operations Update

21 April 2025

Q3 FY2025 Financial Report

30 May 2025

Q4 FY2025 Operations Update

21 July 2025

FY2025 Financial Report

27 October 2025

Stock information

Exchange

Warsaw Stock Exchange

Stock quote currency

PLN

Shares issued as of 30 June 2024

293,429,230

Bloomberg

KER PW

Refinitiv Eikon ticker

KER.WA

ISIN code

LU0327357389

Cautionary statement

Certain statements in this document are for-

ward-looking statements. By their nature, for-

ward-looking statements involve a number of

risks, uncertainties, or assumptions that could

cause actual results or events to differ materi-

ally from those expressed or implied by the for-

ward-looking statements. These risks, uncer-

tainties, or assumptions could adversely affect

the outcome and financial effects of the plans

and events described herein. Forward-looking

statements contained in this document regard-

ing past trends or activities should not be

taken as a representation that such trends or

activities will continue in the future. You should

not place undue reliance on forward-looking

statements, which speak only as of the date of

this announcement. Except as required by

law, the Company is under no obligation to up-

date or keep current the forward-looking state-

ments contained in this document or to correct

any inaccuracies that may become apparent

in such forward-looking statements.

This document does not constitute or form part

of any offer or invitation to sell or purchase, or

any solicitation of any offer to sell or purchase

any shares or securities. It is not intended to

form the basis upon which any investment de-

cision or any decision to purchase any interest

in Kernel Holding S.A. is made. Information in

this document relating to the price at which in-

vestments have been bought or sold in the

past or the yield on investments cannot be re-

lied upon as a guide to future performance.