KenolKobil’s Group Managing Director David Ohana opens up in a candid interview

NAIROBI: KenolKobil has managed a significant turnaround from a Sh6 billion loss booked in 2012 to profits of Sh1.1 billion in 2014. In the first half of this year, the firm announced profits of Sh918 million. We spoke to Group Managing Director David Ohana about the events that led to the turnaround.

Tell us a bit about your background.

I’m an Israeli who is also very Kenyan. I have lived here for 14 years with my family. I am an economist with extensive experience in the oil industry. My career began in the Israeli army and I also worked with the Israel Pipeline Company.

Before being appointed Group Managing Director of KenolKobil in 2012, I served as General Manager for KenolKobil Kenya. I joined the company in 2002, and have held the positions of head of operations and project development, and head of marketing and fuel business. At an industry level, I served as chairman of the Petroleum Institute of East Africa for two years, and chaired the Kenya Oil Industry Supply Co-ordination Committee until my term ended in April 2013.

Your company has had its fair share of success in several countries across Africa. What are you doing right?

Our main focus has been in the retail business and high-yield-margin segments, like lubricants and liquefied petroleum gas (LPG). Our expansive retail network of over 400 stations in Kenya, Rwanda, Burundi, Uganda, Tanzania, Zambia and Ethiopia are a key element of this growth. We are also very active in the aviation and export business, which has helped drive sales.

How did the business move from billion-shilling losses in 2012 to profits just two short years later?

We cultivated great discipline in ourselves as a business, especially in the key areas of debt and cost management.

The oil industry is subject to heavy borrowing to finance fuel imports, as well as forex exposures, especially against the dollar and Kenya shilling. To manage debt ratios and combat the effects of a weakening shilling, we executed an aggressive debt repayment plan, which focused on repaying dollar-dominated loans first. We also adopted stringent forex management strategies to ensure we maintain a healthy balance between dollar and shilling transactions.

Also, very importantly, we have strategic inventory management, especially now that we are in a market that is in price backwardation.

All these things were driven by focused and committed employees, who are really the people doing the job. I am only one man, and cannot do it without my team.

What are the challenges and opportunities in Africa’s oil industry?

Oil companies like ours gain value over time. Now, especially, we have an advantage due to declining oil prices.

These are good for the industry as low prices spur economic growth. Of course, it’s a possibility that oil prices can go back up, but not to the levels of $100 (Sh10,300) per barrel we experienced previously.

In addition, the many oil companies discovering oil in Kenya and the region make countries like Uganda, Rwanda and Burundi very attractive for investment, despite any other challenges they may have. Generally, there is good appetite for downstream business, which will continue to grow especially if the low oil price trend continues.

The implications of declining oil prices, currency fluctuations and increased interest rates for your business?

Interest rates are coupled with currency fluctuations, and we have seen a drastic devaluation of the Kenya shilling recently, which has caused interest rates to rise. We anticipated this exposure and managed it. We will continue to do so, especially through prudent management of dollar-driven segments, such as aviation and export business segments. If the shilling continues deteriorating, then further interest rate hikes will be inevitable. However such a scenario is bound to paralyse businesses in Kenya and that is disastrous for a developing economy such as this one.

You signed an agreement with BP Southern Africa for sole marketing of Castrol Lubricants in Kenya, and with Diamond Trust Bank for an advanced fuel card system. What is your objective?

As mentioned, our strategy is to focus on high-margin segments, and lubricants is one of them. While we have our own K- Lube, Castrol Lubricants allow us to reach a wider market, especially the high-performance automotive and industrial segment, due to Castrol’s superior formulation.

With our focus also being on growing our retail network, DTB’s online fuel card platform will boost the growth of our K-Card, enabling us provide more efficient services to our customers, over and above the discounts available on the K-Card.

Five values that you have learnt that are essential to a business’ growth?

Leading by example, being hands on, attention to detail, dreaming big and accountability. You cannot succeed if you do not dream beyond the horizon, and to achieve these dreams, you must demand results.

What is your main challenge?

To take care of my staff and make sure I retain them. They are excellent. We try to motivate them through various benefits and creating an ideal environment for everyone to thrive.

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