Chevron buyout boosts Total Kenya’s profits

However, the company’s cash flow position remains in the negative territory at Sh10 billion compared to last year’s Sh4 billion putting into doubt its ability to generate sufficient cash to run its high operating costs in the long term.

New preference shares

The company’s share price rose by 10 per cent from Sh29 on Wednesday to Sh32 on Thursday, according to brokers at Suntra Investment Bank.

“Unlike ordinary preference shares that generally attract a constant dividend payout that is not pegged on a company’s annual performance, the new preference shareholder will get dividends from the same pool of after tax earnings as ordinary shareholders,” said Johnson Nderi of Suntra Investment Bank.

The new preference shares account for 70 per cent of the oil marketer’s 175 million issued shares.

Until the Sh7.5 billion loan from parent company Total Outre Mer is fully paid, it could take long before Total Kenya shareholders start earning dividends similar to what they earned before the transaction, according to researchers at Suntra.

There remains strong demand for the shares, however it should be noted that most of the stocks are preference shares owned by the parent company hence dividend will not really benefit the local market,” said Mr Nderi.

The cost financing interest charged on outstanding loans, borrowed to finance increased working capital, went up by Sh366 million.

In recent years, capacity constraints on the national pipeline has seen industry players revert to the expensive road transport pushing up operating costs.

High cost business

As a result, the high cost business environment has slowed down the industry’s earnings while increased competition has seen a number of big oil players quit the Kenyan market.

“The management remains optimistic that there will be improved product flow to upcountry locations,” said Mr Majekodunmi.

Last year volatility in international oil prices contributed largely to the negative results that Total posted, as competitors reduced their prices forcing the oil marketer to dump expensive stock at low prices.

“The local currency having strengthened in the last few weeks from highs of Sh82 to Sh80 against the dollar gives a cushion against the high crude costs,” said Robert Mwaluko of Drummond Investment Bank.

Crude oil was trading at $75.99 per barrel on Thursday, having gained from $75.44 per barrel the previous day.