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KenolKobil to fire up regional operations

NAIROBI, Kenya, Mar 24- KenolKobil Limited has said that it will leverage on its businesses outside Kenya to balance out the effect that the challenging operating environment in the country is having on its operations.

Chairman and Group Managing Director Jacob Segman said their geographical expansion and their continued focus on certain niche business lines were helping to cushion the company from the stringent regulatory environment in Kenya.

"The development of new business lines over the recent years such as African trading desk, non-fuels, LPG (Liquefied Petroleum Gas), fuel oil business among others has proved itself a winning strategy, hence the influence of the very disturbing Kenyan oil industry operating environment has had limited effect on the KK Group," said the chairman.

The expansion plans which started in 1999 have seen the group enter seven markets in East and Southern Africa and at the same time strengthen its foothold in those subsidiaries.

In December last year, the Energy Ministry gazetted regulations to control retail fuel prices which have in the past been blamed for increase in the cost of transport and consumer goods.

The move however did not go down well with oil marketers who warned that it would lead to perennial fuel shortages.

But even with these \’unfriendly\’ laws and \’government interference,\’ Mr Segman reiterated their intention to continue playing a major role in the Kenyan market \’with a view to bring about a positive change in this still very important market for the group\’.

The Kenyan market has continued to contribute significantly towards the oil marketer\’s bottom line as seen in the December 31, 2010 financial results where the company reported a 37.2 percent growth to Sh1.77billion in net profit.

The group\’s profit before income tax rose by Sh764million from the Sh1.9billion posted in the year to December 2009 while the net sales went up by 5.2 percent to Sh101.7billion.

"The average gross margin per unit has gone up mainly due to stronger contribution coming from sectors such as trading, resell, LPG (liquefied petroleum gas), exports, lubricants, fuel oil and non fuels," said Mr Segman.

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Finance costs increased as well mainly due to the significant rise in exchange losses of Sh438million as a result of weak local currencies in almost all countries of operation. Kenya for instance suffered the highest exchange loss of Sh361million which included Sh135million losses due to hedging positions taken on the shilling versus the US dollar exchange.

The marketer however remains optimistic about the future with the business visibility for the first half of the 2011 financial year already indicating a double digit growth in net profit.

"The management will continue to focus on positioning the group strongly in downstream and mid stream in all markets it operates in and in the new markets through organic growth and acquisitions," Mr Segman added.

The board has recommended a final dividend of Sh0.52 per share for the year subject to shareholders\’ approval during their Annual General Meeting on April 28.

Follow the author at https://twitter.com/cirunjoroge

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