Oil marketer KenolKobil is turning to assets sales and cost cutting to reverse a loss of Sh6.2 billion—which is the highest among firms listed at the Nairobi bourse.
The company’s loss for the year ended December reversed the net profit of Sh3.2 billion it posted in 2011 as high operating expenses, lower sales and foreign exchange losses took toll.
Kenol said it will not pay a dividend in the period that has seen the marketer’s share shed 22 per cent over the past three months to the current Sh10.45 in a period that most counters at the Nairobi bourse have risen by double-digits.
The company says it will reduce the order of fuel stocks and sell undisclosed non-core assets to help reduce borrowing and loan costs expenses.
The CEO of KenolKobil Jacob Segman attributed the poor performance to lower sales and currency hedging contracts—which left it with a loss of Sh4.6 billion compared to Sh1.1 billion a year earlier.
“Sales volumes and turnover went down 21 per cent and 13 per cent respectively, mainly due to lower sales in the Africa trading desk and aviation,” said Mr Segman.
“The most significant impact come from realised exchange losses on forward contracts taken in the later part of 2011 and first quarter of 2012,” added Mr Segman.
Its operating profit dropped to Sh4.2 billion from Sh12.3 billion last year on the lower sales and higher operating expenses. The losses were softened by a tax credit of Sh2.6 billion since pre-tax loss stood at Sh8.9 billion.
KenolKobil said it will pursue fresh partnerships after Swiss firm Puma Energy dropped its bid to acquire a majority stake in the firm, scuttling the company’s growth ambitions.
The company, which engages in huge foreign currency denominated transaction in its importation of oil, had taken the hedging contract after the shilling depreciated to an all-time-low of 107 units to the dollar in mid-October 2011.
The contract protected KenolKobil during periods of depreciation of the shilling but would have exposed it in times when the currency appreciated as it is an agreement to buy foreign currency at a pre-determined rate.
The shilling has stabilised at about Sh85 since mid last year. This marks a poor season for investors in oil stocks since Total Kenya, Kenol’s chief rivals, also reported a loss of Sh202 million compared to Sh71.4 million in 2011, mainly due to a settlement of a botched supply deal.
Unlike Kenol, Total paid a dividend of Sh0.20 a share, a move that has seen its share gain 10 per cent in the past three months to trade at Sh15.30.
Last year, Kenol said it was putting on hold new investments to protect cash.
“The group has noted in quarter one a drop of about 35 per cent in overall monthly running cost,” said Mr Segman. “Above actions together with a more conservative forex hedging, marketing and pricing policies are expected to drive the turnaround in 2013.”