By Macharia Kamau
Kenya Oil Company Ltd (Kenol) posted Sh1.88 billion pre-tax profit to reflect over 100 per cent increase in earnings for the year ending December 31 last year.
The impressive growth in earnings climbed from Sh876 million realised the previous year.
The company had, however, changed its year end trading period from September to December, hence the current result covers a 15-month period from October 2007 to December last year.
Comparing the 15-month period ended December last year to the 12-month period ended September 2007, the profit before tax rose by more than 100 per cent.
On a 12-month comparative period (January to December), profits before tax went up by 76 per cent to Sh1.55 billion. Last year’s results also reflected figures for Kobil Petroleum, which it acquired towards end of 2007. In a statement signed by Mr Jacob Segman, acting chairman and group managing director, the company said profits posted last year were despite a harsh business environment.
negative impact
"Post-election violence, volatility of oil prices, the scandal within the storage and transport systems of East Africa and low quality products from the refinery impacted on the supplies and the margins in the region," said Segman in the statement.
He added that due to the constraints in the supply and storage system, the company had to use alternative distribution solutions, which ate into its profit margins as distribution costs went up 58 per cent last year.
Kenol has operations across the region, most of which depend on Kenya’s storage and transport system.
Financing costs rose by 273 per cent from Sh234 million in 2007 to over Sh1.5 billion last year, which the company attributed to high oil prices, increased borrowing from banks and high interest rates charged by banks.
"Financing costs escalated due to increased borrowings mainly due to high oil prices impacting on cost of products stock and receivables, in addition to the continuous long delays in Tax refunds from the Kenya Revenue Authority. Banks charged increased premiums and rates due to lack of liquidity in the market," said Segman.
The strengthening of the dollar against the local currency played a part in increasing the financing costs.
"The high financing costs eroded profits with the biggest impact coming from unrealised Exchange Loss, increasing by Sh980 million last year over 2007 resulting from the strengthening of the Dollar across the countries we operate in.
The company sees the same problems dogging the industry this year and does not expect pump prices to come down further.
"Ullage constraints in pipeline system in Kenya will continue affecting the cost of distribution in the country and the region," said Segman.
The company’s directors recommended a final dividend of Sh3.50 per share to be approved during the annual general meeting on May 22. The dividends will be paid out in June this year.
