French oil marketer in big win as Total Kenya nets Sh1.3bn profit

Corporate News

A Total Kenya petrol station. The oil marketer has recorded a Sh1.3 billion net profit for 2013, reversing a Sh202 million loss recorded a year earlier. Photo/FILE 

By VICTOR JUMA

In Summary

• The performance was largely driven by a saving of Sh1.2 billion in finance costs following its parent firm Total Outre-Mer’s injection of Sh5.2 billion in 2012 to retire the oil marketer’s pricey loans.
• Total Outre-Mer will receive Sh354.9 million out of the Sh377.7 million total, with minority investors notably Jubilee Insurance and billionaire John Kibunga Kimani sharing out the rest.

Total Kenya ended its two-year loss-making streak in the year ended December, helped by the retirement of expensive short-term loans in a process that will see the French parent haul off most of the gains.

The oil marketing subsidiary announced a Sh1.3 billion net profit in the period under review, reversing net losses of Sh202 million (in 2012) and Sh71.4 million (2011).

The performance was largely driven by a saving of Sh1.2 billion in finance costs following its parent firm Total Outre-Mer’s injection of Sh5.2 billion in 2012 to retire the oil marketer’s pricey loans.

“This (performance) was achieved through improved operating income and significant reduction in financing expenses,” Total said in a statement.

The Sh5.2 billion cash injection via preference shares has helped the firm cut its short term borrowings from a high of Sh11.7 billion in December 2011 to Sh2.4 billion in December last year. Finance costs in the review period were also reduced by falling interest rates on the remaining portion of the debt.

READ: Total owners firm grip on company with Sh5bn buy-in

Total tripled its dividend payout to 60 cents per share, with most of the cash set to be bagged by its parent firm that significantly raised its stake through the Sh5.2 billion transaction.

The French multinational paid Sh15.71 for each of the 330.9 million preference shares it was allotted in the company for the cash injection. This raised its stake to 93.96 per cent from the previous 87.27 per cent as minority investors underwent a 52.6 per cent dilution.

Total Outre-Mer will receive Sh354.9 million out of the Sh377.7 million total, with minority investors notably Jubilee Insurance and billionaire John Kibunga Kimani sharing out the rest.

The multinational already owned 126.3 million ordinary shares and 123.4 million preference shares in the oil marketer before the latest stock deal.

The new preference shares are redeemable and earn dividend at the same rate as ordinary shares, with the company having a right to buy them back.

Only ordinary shares carry voting rights but the French multinational has majority control on that front as well, having the power to appoint directors and top executives.

Analysts at Standard Investment Bank (SIB) expected the firm to declare a higher dividend and observed that the lower payout could be due to a cash buildup for paying down part of the preference shares.

“We see the accumulation of cash as setting the stage for an eventual pay down of preference shares (Sh9.1bn),” said analysts at Standard Investment Bank.

Total’s stock has gained 26.3 per cent over the past six months to trade at Sh23 and yesterday chalked up Sh1.50 to end at Sh25.50.