Total Kenya in Sh282m loss, blames ERC formula

NAIROBI, Kenya, Aug 23rd- Total Kenya reported a Sh282.8 million pre-tax loss for the first half of the year, compared to a Sh145.4 million profit in the same period last year.

The oil marketer’s Managing Director Alexis Vovk attributed the loss to the Energy Regulatory Commission’s (ERC) price formula.

“Owing to the fact that the ERC price formula does not fully recognize the real cost of financing the Working Capital Requirement and has not been adjusted for any inflation on costs for the last 18 months, the company as a result realized a net loss,” he explained in a statement.

Vovk also cited supply and logistical constraints within the Kenyan oil industry as having a negative impact on business.

Sales volume declined by eight percent from 426 Kilometertons (KMT) in 2011 to 393 KMT in June 2012.

Turnover increased by 7.4 percent to Sh48 billion, while financial expenses nearly tripled up by Sh749 million to Sh1.1 billion.

The company said finance costs peaked due to the sharp increase in interest rates coupled with increased bank borrowing to finance higher working capital requirements.

Operating profits climbed 65.1 percent to Sh851.3 million up from Sh516 million.

Gross profit increased by Sh704 million, a 35 percent jump resulting mainly from improved margins in both fuels and lubricant sales.

However, Total Kenya expressed optimism in the second half citing easing inflation, the stabilising shilling and falling interest rates as key indicators to boost the company’s performance.