KenolKobil eyes higher revenue with Sh1.5bn Nairobi office block

What you need to know:

The 22-storey building will be located on a one-acre parcel of land near the Parliament round-about.
It is part of the company’s renewed investments that it is betting on to grow earnings in the competitive oil marketing business.
The office block will enable the company to move its head office operations from the rented space at ICEA Building.

KenolKobil is set to build a Sh1.5 billion office block in Nairobi’s central business district to serve as its new headquarters besides generating rental income.

The move is part of the company’s renewed investments that it is betting on to grow earnings in the competitive oil marketing business.

The 22-storey building will be built on Haile Selassie Avenue, allowing the company to move its head office operations from the rented space at ICEA Building which it has occupied for over 30 years.

“Our new headquarters will be located on a one-acre parcel of land that we own near the Parliament round-about,” said David Ohana, KenolKobil’s chief executive officer.

“Out of the 22 floors, we shall probably occupy two or three floors and lease out the rest. This project and others in the pipeline are being financed using our cash reserves.”

Kenol currently occupies two floors on the ICEA building, leased from the Jomo Kenyatta University of Agriculture and Technology.

The NSE-listed firm, which is ranked third locally with a 12.5 per cent market share, says the project has received board approval and construction is expected to start next May and last at least two years.

KenolKobil, which returned to profitability after a record loss in 2012, has also announced plans to build a $5 million (Sh510 million) LPG facility in Kisumu.

Kenol has also renewed a partnership with BP Southern Africa which will see the oil marketer distribute BP’s Castrol lubricants exclusively in the local market.

The deal ended a legal tussle between the two firms after BP tried to replace Kenol with another distributor.

KenolKobil’s push to own its own head office is part of a raft of investments that highlight its shifting strategy away from downsizing which it embraced from 2013.

The loss in 2012 forced the company into cost-cutting, sale of non-core assets and a freeze on new investments.

READ: KenolKobil 2014 net profit up 95pc, sees more gains in 2015

Mr Ohana announced that Kenol has contracted a South African firm to build a 300-tonne liquefied petroleum gas (LPG) facility in Kisumu to meet growing demand in the western region and parts of Uganda.

The LPG facility, which KenolKobil expects to be operational by the end of next year, will be the second such facility it owns in Kenya after the one it operates in Nairobi’s Industrial Area.

KenolKobil’s board of directors recently approved the project with a capital outlay of between $3 million (Sh306 million) and $5 million (Sh510 million), Mr Ohana said.

“The demand in western is growing and, instead of expensively ferrying gas from our Nairobi facility, it is more economical to set up a plant in the area,” he said.

Besides the head office and LPG facility, KenolKobil is investing in expanding its service stations. It has added 47 new stations, including 12 in Kenya, over the past two years in what has brought the total count to 450.

The firm has set aside $4 million (Sh408 million) to build two service stations in South C and South B estates in Nairobi which include rental space including eateries such as Pizza Inn and Chicken Inn.