KenolKobil net profit up to Sh918m on cost-cutting

Oil marketer KenolKobil reported a 73 per cent jump in net profit for the half-year ended June, helped by cost-cutting measures that compensated for lower sales.

The firm made a net profit of Sh918.4 million in the period compared to Sh531.1 million a year earlier, a performance that saw the company declare an interim dividend of Sh0.1 (10 cents) per share.

Its revenue fell 19.2 per cent to Sh34.8 billion, dipping Sh8.3 billion in absolute terms.

The cost of goods sold (COGS), however, dropped by an even larger 21.4 per cent to Sh31.9 billion, boosting the gross profit from savings of Sh8.6 billion.

“During the period, the group continued to focus on profit optimisation in all business segments together with growth in volumes,” Kenol said in a statement.

“This, coupled with effective inventory management, saw the group register an eight per cent increase in volumes in spite of increased competition in the market place, and improved gross margins.”

Kenol also kept a tight lid on other costs, saving Sh289.8 million as finance costs dropped 43.3 per cent to Sh379.4 million. This came as borrowings declined to Sh8.5 billion from Sh10.4 billion.

The company has said it wants to have very little debt by mid next year to avoid high interest payments and forex losses that have hurt oil marketers relying heavily on bank financing.

Kenol said it has sworn off currency hedging despite its forex losses rising nine per cent to Sh155 million on account of regional currencies’ weakening against the dollar.

“It is the group’s policy not to take any foreign exchange hedging positions,” the company said, noting that its business has a natural hedge of dollar inflows that offsets the dollar liabilities.