KenolKobil, the renamed entity from Kenya Oil Company Ltd.
Sales volumes are projected to be up compared to 2008, but net income to be down over the same period, which the company blames on volatility of oil prices(KQ also attributed their losses to this however the difference here was that KQ messed up on their hedging strategies,interesting enough KQ has one of the best treasuries in corporate Kenya, but seems this gamble was not very well calculated, I would recommend them to go for options, so that they are hedged against price increases by having the option but NOT the obligation to buy oil at a predetermined price, and if the price is below this level, then they just buy from the market, the only challenge here being the fixed fee for this is high, however should be better than the reported losses.)
Back to KenolKobil, they also blamed the inefficiency of both the Kenya Pipeline and the Oil Refinery (this is blamed by all oil companies not performing well, so they should have already prepared for this.. not good enough) , and of course the erratic exchange rates (again a hedging strategy would suffice on this, since they know their estimated needs for the next few months, if not years.)
Here comes the good part ”bad debts provision made for one specific Commercial customer”, does this sound like Triton or is it another specific customer??
All in all, i hope this company recovers, since I think its still one of the success stories of Kenya that we have.
Disclaimer: These are our personal views and you are strongly advised to seek professional advise before making any investment decisions. Riba Capital cannot be held liable or responsible for any action taken on the basis of this commentary. We take no responsibility for the accuracy of the data or commentary provided here, neither should it be used as the primary or sole source of information for financial or investment decisions.
{ 2 comments… read them below or add one }
Kenol has NO choice BUT to rely on KPRL & KPC… saying that Kenol should be prepared is a little disingenious.
The GoK (read my blog for details) FORCES all OMs to use KPRL for 70% of their needs. So how do you mitigate that?
Add salt to the wound. KPRL can only process 50% of the needs/demand. So Kenol can't sell as much as they want… That is where triton comes in… They are the favoured kids of corrupt politicians…
KPC lied to Kenol & Kenyans about the new pumping capacity. kibz did a dog & pony show about 'opening' the pipeline… then… nothing…
Now… if I tell you I will deliver… at some point I have to believe you…
The customer is Pan Paper… the GoK had sorta made noises about helping PanPaper thus Kenol continued supplying PanPaper…
CT: Exactly my point, KenolKobil knows that they are tied to GoK, and they have always been so this is not a new requirement that they have to abide by, KPRL has always been inefficient, again this is not new info and they have always had to take this into consideration when they are planning.
So as much as these inefficiencies affect their business they are not the main reason that they didn't perfom this time.
The point is, the provision they have to make for this mystery customer? is where their money seems to be going.
Leave a Comment