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KenolKobil swings back to profit on cost-cutting

BUSINESS
By By James Anyanzwa | April 11th 2014

By James Anyanzwa

Oil marketer Kenolkobil has reported a pre-tax profit of Sh564 million for the year ended December 31,2013, marking a major turnaround from the previous year’s loss of Sh8.96 billion.

As a result, the company has declared a dividend payout of Sh0.1 (10 cents) per share for its shareholders.

The company, which is listed on the Nairobi Securities Exchange (NSE), has also embarked on programmes meant to reduce risk and improve on its operating environment.

Among these initiatives include dispute resolution mechanisms, control of forex hedging, control of trading activities and capital investments, focusing on high margin sales and exiting low margin businesses.

Managing Director David Ohana said the company would also focus on reducing its debt levels while increasing the proportion of the shareholders’ equity.

In a statement yesterday, Mr Ohana said all the non-performing and underperforming assets of the company would be disposed of.

He said the group is currently undergoing a major restructuring programme to consolidate its market share in the competitive oil industry.

He said the re-organisation, which started last year, includes corporate restructuring, financing costs, operating costs, and human resource alignment and risk reduction.

“Management has also been streamlined and made more efficient by removing operating barriers between the subsidiaries and headquarters,” said Ohana.

According to the group’s audited financial statements financing costs dropped by 28 per cent to Sh1.62 billion from Sh2.27 billion as the company optimised inventory, reduced borrowing and re-negotiated interest rates on bank loans.

During the period under review the oil marketer explained it managed to reduce borrowing by seven per cent to Sh15.4 billion from Sh16.6 billion while exchange rate losses declined to Sh105.3 million from Sh4.6 billion.

Distribution costs

Administration and operating costs dropped 43 per cent to Sh3.36 billion from Sh5.85 billion while distribution costs decreased 24 per cent to Sh761.4 million from Sh995.6 million in a similar period. Net sales, according to the trading results, fell 43 per cent to Sh109.68 billion from Sh192.52 billion in the previous year.

Ohana said operational efficiency and the quest for increased efficiencies necessitated a reduction in workforce by 41 per cent from 574 employees in 2012 to 338 employees in 2013 within the entire group.

Last year the planned takeover of the regional oil marketer by the Switzerland-based Puma Energy, a subsidiary of the commodity trading multinational Trafigura Beheer BV collapsed after several months of negotiations.

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