KenolKobil H1 profit jumps to Sh531m on cost-cutting [Business Daily (Kenya)]
(Business Daily (Kenya) Via Acquire Media NewsEdge) Oil marketer KenolKobil more than tripled its net profit in the half-year ended June, helped by asset sales and aggressive cost-cutting that made up for reduced sales.
The firm's net profit in the period stood at Sh531.1 million compared to Sh147.3 million the year before, representing a 260.4 per cent jump.
Its sales fell by a third to Sh43.1 billion, underlining the boost that the firm's strategy to cut costs and sell non-core assets such as land had on the bottom line.
"This improvement results from the continuation of management's focus on corporate restructuring, financing costs, human resources alignment, and risk reduction," Kenol said in a statement.
Its share price has lost 13 per cent in the past six months to trade at Sh8.
The firm continued with its asset sales programme which saw its 'other income' rise 38.1 per cent to Sh383.6 million.
KenolKobil's operating expenses also dropped 21.9 per cent to Sh917.2 million, partly reflecting the impact of staff retrenchment that started last year when a total of 236 employees were laid off.
Foreign exchange losses — which were responsible for its Sh6.2 billion loss in 2012-— fell 16.4 per cent to Sh669.3 million.
This was achieved by a reduction in borrowings to Sh13.3 billion from Sh14.8 billion. Kenol's cost of goods sold (COGS) dropped 35.7 per cent to Sh40.2 billion, improving its gross margins to 6.8 per cent from 4.1 per cent.
While profitability has increased substantially, the lower sales are a signal that the firm continues to lose market share to its top rivals.
The oil marketer lost seven percentage points market share to rivals last year, ceding its position as Kenya's second biggest retailer of petroleum products to Vivo Energy.
Industry statistics show that Kenol controlled 13.8 per cent market share, compared to the 20.8 per cent it commanded a year earlier.
READ: KenolKobil loses market share to small dealers
This saw the oil marketer rank third, as Vivo rose to claim the second spot with a market share of 17.2 per cent last year from 17.1 per cent in 2012.
Smaller oil marketers, including Oilibya, were the biggest beneficiaries of KenolKobil's reduced sales volumes as Total Kenya retained its market leadership with a 21.7 per cent share, up marginally from 21.4 per cent.
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