Oil marketer KenolKobil #ticker:KENO has spent Sh320 million on settling several long-standing legal cases, revealing the financial toll that litigation can have on a company’s bottom-line.
Kenol, in its financial results for the six months to June, disclosed that administrative and operation costs increased 41 per cent to Sh1.4 billion due to “settlement of various old legal disputes and inflationary pressure.”
David Ohana, the firm’s managing director, has now disclosed that nearly a quarter of this expense resulted from the NSE-listed firm’s settling of seven legal cases.
“KenolKobil was at some point heavily engaged in litigation. We have settled some of those cases and made payments in the first half of this year,” Mr Ohana said in an interview.
“This expense is a combination of the money we paid to the concerned litigants as well as the lawyers representing us. As you know, lawyers in Kenya do not come cheap.”
Some of the high profile cases that Kenol has been involved in include the battle with the defunct Kenya Petroleum Refineries Ltd (KPRL).
Kenol, which was claiming to be paid Sh1.8 billion as compensation for product losses incurred due to inefficiencies at the facility has since dropped the case and almost completed writing off the claim.
The oil marketer in 2006 took Kenya Pipeline Company to court accusing it of irregularly terminating a fuel storage contract they had signed.
Its latest battle involved a businessman who threatened to attach Kenol’s property claiming he was, in 2005, ejected from premises he leased from the oil marketer for 15 years beginning 2001.
Mr Ohana did not offer specifics of which cases they had settled, only stating that the payments had a huge impact on the company’s half-year performance.
“We wrote off Sh300 million in KPRL debt in the six months to June. If you combine this with the Sh320 million to settle the litigation matters, the amount is significant,” he said.
“If these costs were not there, the company would have made about Sh2.1 billion in net profit as opposed to the Sh1.42 billion posted.”