KenolKobil’s share price hits 15-month low

KenolKobil petrol station on Limuru Road in Gigiri, Nairobi. The oil marketer’s share price at the Nairobi Stock Exchange reduced sharply in the first day of trading since the company made a Sh6 billion loss. Photo/FILE  NATION

By JOSHUA MASINDE jmasinde@ke.nationmedia.com

In Summary

• Industry experts say that the tight regulation of the sector by the Energy Regulatory Commission is what has partly caused the sector to report lower earnings. Some say the pricing formula used by the ERC leaves very small margins for the operators.

KenolKobil’s stock at the Nairobi Securities Exchange plummeted to a 15-month low on the first day of trading since the company announced a Sh6 billion loss on Monday.

The counter, the only loser among the day’s top movers, witnessed selling pressure as investors moved to offload the stock following the release of the poor financial results for 2012 with the share price dropping to Sh9.05.

Market analysts are however optimistic that the stock will not fall further given that the oil marketer is still in the profit-making zone and is bound to rebound in future.

“There will be some resistance as some people might want to buy it (the stock) at this level. It is generally a profitable company but last year wasn’t so good for the oil marketers,” an ABC Capital official said. The stock closed trading at Sh9.7.

Following a failed takeover bid by Puma Energy, the oil marketer is currently pursuing strategic options, including the search of a potential long-term strategic investors to secure and grow the value of its share.

Industry experts say that the tight regulation of the sector by the Energy Regulatory Commission is what has partly caused the sector to report lower earnings. Some say the pricing formula used by the ERC leaves very small margins for the operators.

KenolKobil’s gross margins fell to 2.2 per cent from 5.5 per cent, with expensive inventory carried in its books having a negative impact on margins.

“Management is further reducing inventories and pursuing higher margin business lines in the Kenyan operations,” Standard Investment Bank analysts said.

Total, one of its competitors, reported a Sh202 million loss in the same year, a result that has also subjected its share at the bourse to selling pressure.

Total blamed the loss on settlement of a claim in a legal case filed against it in a London court.

Led by National Oil Corporation (Nock) and Vivo Energy, oil marketers have in the past week announced a reduction in the price of diesel in separate attempts to attract and retain customers as competition intensifies in the sector.

Nock cut its diesel prices by Sh2 while Vivo, the company that operates Shell, sliced Sh3 off its diesel pump price.