Kenya Shell lays off 24 executives to cut costs

Mr Polycarp Igathe. He is targeting a lean management team. Photo/Diana Ngila 

By VICTOR JUMA

In Summary

• The reorganisation is the culmination of a major strategy aimed at a lean executive team and lower executive pay.
• The oil dealer failed to reveal the names and titles of the 24 executives whose last working day is end of this month.  
• The company had a total of 211 employees as of October last year.

Oil marketer Vivo Energy Kenya, formerly Shell, has executed an ambitious restructuring plan that has led to laying off 24 executives.

The reorganisation is the culmination of a major strategy and business review plan that Vivo’s managing director Polycarp Igathe initiated, aimed at a lean executive team and lower executive pay.

The changes are Mr Igathe’s first show of hand since he took the oil dealer’s top seat in February from consumer goods manufacturer Haco Tiger Brands where was the regional head.

The oil dealer failed to reveal the names and titles of the 24 executives whose last working day is end of this month.

Mr Igathe attributed the layoffs to the “harsh operating environment in the oil industry.”

“We regret to release 24 outstanding executives,” Mr Igathe said in a statement Wednesday. “We have no doubt they will bounce into bigger opportunities despite present outcomes within the oil industry,” he added.

The company did not clarify which departments are headed by the outgoing executives who will be paid benefits for termination. It had a total of 211 employees as of October last year.

Vivo’s market share dropped marginally to 17.1 per cent last year compared to 17.8 per cent in 2011, maintaining its position as the third largest oil marketer in local volume sales.

This ranks it behind KenolKobil with a 20.8 per cent share and market leader Total with 21.4 per cent.

The oil industry has been grappling with inefficiencies at the Kenya Petroleum Refineries Ltd and Kenya Pipeline Company Ltd that has frequently disrupted supply of products.

Vivo, Kenol, and Total are locked in a battle for supremacy in the local oil market where sales volumes has become a critical driver of profitability in the age of price controls.

Vivo was born after oil trader Vitol and private equity firm Helios Investment Partners acquired the majority of Shell’s shareholding in their business in Kenya.

(Read: Kenya Shell rebrands, appoints new boss)

Vivo’s parent firm has announced a major investment in its African subsidiaries in what is set to further raise its rivalry with firms like French giant Total Outre-mer which owns Total Kenya.

Vivo Energy is set to invest $200 million in Africa’s fuel sector and plans, within months, to enter three new countries, its chairman Paul Greenslade told Reuters at the recent FT Global Commodities Summit in Switzerland. Vivo is still dwarfed on the continent by France’s Total but the new investment could narrow the gap.
 

“We’ve got big capital investment plans. We plan to invest $200 million over the next few years. We’re opening 50 new stations a year,” Mr Greenslade said.

Vivo Energy Kenya has 114 retail sites, products storage capacity of 81,800 cubic metres and 750 metric tonnes of LPG storage in the Nairobi and Mombasa depots, a lubricants blending plant in Mombasa and LPG filling plants in both Nairobi and Mombasa.

Vivo does not publish its results but the performance of its peers listed on the Nairobi Securities Exchange signal the lean times among the oil majors.

KenolKobil posted a Sh6.2 billion net loss last year — the biggest among firms listed at the NSE. The loss reversed the Sh3.2 billion net profit it posted in 2011 as high operating expenses, lower sales and forex losses took toll on its earnings.