Ratio Magazine :: The Inside Track to East Africa’s Economies - Kenya: Press Releases: KenolKobil Publish Six-Month Results

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Kenya: Press Releases: KenolKobil Publish Six-Month Results

Monday, 17 August 2009

During the period under review, the company had changed its name from Kenya Oil Company Limited to KenolKobil Limited.

The group’s results for the first six months of 2009 were affected by the global economic and financial meltdown, with the impact felt in the entire business environment in the domestic, regional and international markets. The performance of the group has been adversely affected by rising international oil prices (after an unprecedented drop from August to December 2008) and inability to timely adjust prices in the different markets the group operates in, while exports and aviation markets recorded heavy losses for the period. Lower average stock holdings during the same period has resulted in lower direct financing cost but as a result had corresponding lower gains in products revaluation.

The entire industry has seen a slow down in activity, but the Kenol Group managed to increase volumes by 19%. However, the group gross margins were still lower than of the same period last year, mainly in Kenya operation, among others due to inability or failure by refinery and pipeline storage system to meet market requirements for the whole region.

The group distribution costs increased by 12% over the 2008 six month period, with 90% of this increase from Kobil Ethiopia, having to cater for distribution across vast areas in the country. The rest of the group contained distribution cost though already very high, due to alternative distribution solutions of getting product from Mombasa to Nairobi, Western Kenya and neighbouring countries to mitigate the unreliable pipeline distribution performance.

Administration and operating overheads increased by 13%, mainly due to debts provision from commercial customers. Excluding this provision, the group managed costs down and achieved a decrease of 9% over the same period of 2008.

Financing costs remain a main area of focus for management. The group’s financing costs increased by 6%, of which 72% is from exchange losses, resulting from the depreciating and fluctuating of local currencies against the US dollar.

Following these challenges, the net result for the group for the period under review, is a loss of KES431m.

For the rest of the year, we expect that whilst the global economic climate struggles to recover, the adverse impact will continue to be felt in the region. It is expected that the volatility of oil prices, distribution constraints, volatile forex market, coupled with strong competition in certain markets, will continue to present challenges to the group and the oil industry albeit, management is more bullish on the second half of the year.

The group will continue focusing on expansion and profitable growth opportunities, and management is strongly optimistic about the future of the group’s profitability.

The Directors do not recommend the payment of an interim dividend.

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