Oil marketer posts Sh3.8bn loss, suspends all key capital projects

Oil marketer KenolKobil has suspended all capital expenditure after it posted a Sh3.89 billion loss in the first half of the year, halting an aggressive expansion programme that saw it land a strategic investor.  

The oil firm, which joined its rival Total Kenya in loss making territory, said the suspension will last until its capital flow improves.

Insiders have linked the loss, the firm’s biggest in history, to a private oil import it made between April and May which it sold at a loss.

KenolKobil attributed the negative performance to the depressed global economic environment, falling international oil prices and turbulent local conditions — with high inflationary pressure, high borrowing costs and foreign exchange rate fluctuations.

“The most significant impact was the loss from foreign exchange hedges taken in the latter part of 2011 and the first two months of 2012,” KenolKobil’s group managing director Jacob Segman said in a statement.

The loss comes at a time when the company is counting on a solid performance to boost its negotiations with Swiss firm Puma Energy to buy the majority stake in the firm.

“The group is optimistic despite the tough economic cycle, and with the ongoing potential deal between key shareholders and Puma Energy — a strategic investor — the management foresee substantial benefits crystalising upon closing of this deal,” Mr Segman said.

The oil marketer said it expects the deal to boost it in inventories management, forex exchange risk, cost of financing and better sources of products for the whole group.

Puma Energy maintains that negotiations are on course but noted that it did not have any timelines on finalising of the deal.

“The due diligence process and price negotiations are continuing. No specific deadline has been set for their completion but all parties are working hard to reach a satisfactory conclusion as soon as possible,” Ms Victoria Dix, head of media relations at Puma Energy, said in an email interview.

KenolKobil’s loss now ends speculation on why its performance was in contrast with that of its main rival, Total Kenya, which reported a Sh260 million net loss for the first half of the year.

But unlike KenolKobil, Total’s management blamed the oil price capping formula for the loss. The pump price capping formula sets maximum fuel prices.

KenolKobil’s cost of sales grew by 32 per cent to Sh101 billion from Sh77 billion reported in a similar period in 2011 while its finance costs more than doubled to Sh1.1 billion in the period under review.

The firm has been on the rise and had adopted an expansion strategy in 1999 which saw it establish operational subsidiaries in six other East, Central and Southern Africa countries, in addition to Kenya, including Uganda, Tanzania, Rwanda, Zambia, Ethiopia and Burundi.

But it is not clear why the company delayed in announcing its results this year.

In 2010, the company announced its half year results on July 28, and on 26 July in 2011.

This year, the firm released its half year financial results on September 7.

Though there is nothing wrong with this date, given that it was within the time frame given by the capital markets authority, insiders say the delay may have been caused by difficulties in trying to find ways of softening the blow.