Money Markets

Total Kenya gets debt relief from parent company

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Alexis Vovk, Total Kenya MD  at a past event. Financing expenses of the firm dropped  by  Sh240m  in three months to September. FILE.

Alexis Vovk, Total Kenya MD at a past event. Financing expenses of the firm dropped by Sh240m in three months to September. FILE.  Nation Media Group

By GEORGE NGIGI

Posted  Thursday, November 29  2012 at  20:27

In Summary

  • The company’s entry into the OTS bids, cost management and development of non-fuel revenues during the quarter saw it make an operating profit of Sh16 million during the quarter, the first in 18 months.
  • The transaction guaranteed the parent firm a dividend regardless of the performance of the Kenyan unit.
  • The company’s management said the pricing formula used by the regulatory body, ERC, to set prices needed to be reviewed so as to reward capital investments as it was locking the potential of Total’s asset base.

Total Kenya’s capital base has risen by Sh5 billion after the conversion of the oil marketer’s shareholder debt into preference shares.

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The change in the Nairobi Securities Exchange (NSE)- listed oil marketer’s capital structure is captured in its nine months financial report, which also reveals a drop in the debt position.

“The balance sheet was strengthened with the increase of the company’s paid up share capital by Sh5.2 billion, resulting from the issuance of additional preference shares,” said Alexis Vovk, the managing director of Total Kenya.

Total Outre Mer, the parent company of Total Kenya, injected additional capital into the local outfit by taking up 331 million redeemable preference shares at Sh15.71 each as conversion of its debt to the firm.

The Paris-based parent firm advanced the loan to its Kenyan unit to finance Total’s acquisition of American oil marketer Chevron Kenya’s assets, then operating as Caltex Kenya, when the international oil dealer was exiting the African continent.

The debt has, however, cost the firm due to high financing costs.

Equity ratio

The company’s debt to equity ratio improved from 145 per cent to 61 per cent following the conversion.

The oil marketer also halved its total liabilities to Sh13.1 billion compared to September last year.

The financing expenses of the company dropped by Sh240 million in the three months to September due to the reduction in the debt burden and the concurrent decline in interest rates.

In the nine months to September the company posted a net loss of Sh243 million compared to Sh69 million profits in a similar period last year.

Total’s sales volume increased by 14 per cent to 779 kilometric tonnes (KMT), which it attributed to sales to other oil marketing companies under the Open Tender System (OTS).

The company’s entry into the OTS bids, cost management and development of non-fuel revenues during the quarter saw it make an operating profit of Sh16 million during the quarter, the first in 18 months.

The transaction guaranteed the parent firm a dividend regardless of the performance of the Kenyan unit.

The company’s management said the pricing formula used by the regulatory body, ERC, to set prices needed to be reviewed so as to reward capital investments as it was locking the potential of Total’s asset base.

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