Money Markets
By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com
In Summary
- The restructuring was carried out beginning the third quarter of the year after the company concluded there was little chance of change in fortunes for the Kenyan business.
- The company this week announced the liquidation of its Kenyan business to concentrate on its new Ethiopian business of infrastructure and manufacturing.
- Oil firms prospecting in the region have been forced into cost reduction as falling oil prices make financing difficult.
Oil and gas services logistics firm Atlas Development
has sacked nearly 750 staff members since July at a cost of Sh255
million ($2.5 million), as fortunes of the oil sector dwindled following
a drop in global oil prices.
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Atlas Development and Support Services chief financial
officer Barry Lobel said the restructuring was carried out beginning the
third quarter of the year after the company concluded there was little
chance of change in fortunes for the Kenyan business.
Atlas this week announced the liquidation of its
Kenyan business— run under subsidiaries Ardan Logistics, Ardan Medical
Services and Ardan Civil Engineering—to concentrate on its new Ethiopian
business of infrastructure and manufacturing.
“We have downscaled at the moment. At the beginning
of the year we had in the region of 800 employees. In July we put out a
notice saying that half one loss was about $2.6 million, and once we
made that announcement we then begun a very large cost-cutting exercise
where we had to pay off and settle the staff, spending about $2.5
million in restructuring,” said Mr Lobel.
“We made a decision at the end of the second
quarter that we could not keep operations going… once we were sure we
would not be able to bounce back this year. As of now we have less than
50 employee,” he added.
Mr Lobel said the company kept its workforce intact
during the first half of the year partly due to the slow impact of the
decline in oil prices early in the year, and on the possibility of new
opportunities coming up in quarter three.
The company, which is listed on both the Nairobi
Securities Exchange (NSE) and the London Stock Exchange, cited the
uncertainty over payment of Sh225 million ($2.2 million) owed to it by
major clients as the reason for closing down its Kenyan subsidiaries.
Oil firms prospecting in the region have been forced into cost reduction as falling oil prices make financing difficult.
Tullow Oil and its partner Africa oil have sold
stakes in their oil blocks in order to raise capital while Australian
firm Pancontinental, US explorer Marathon Oil, Afren and Tower Resources
of the UK have also sold off some or all of their Kenyan interests this
year.
“The drop in oil has not spared any companies. More
so, the smaller companies that are heavily dependent on leveraging – a
common characteristic of African exploration and production companies –
have seen drastic declines in cross-listed exchanges… This has resulted
in a significant decrease in expenditure by the companies,” said Genghis
Capital analyst Kaigua Munyi.
According to Mr Lobel, Atlas saw losses of Sh82
million ($800,000) per month between April and July, while requiring
Sh15.3 million ($150,000) per month to finance idle equipment worth $2.2
million acquired through debt.
Atlas’ revenue is projected to fall to $15 million
(Sh1.5 billion) this year. from $40 million (Sh4 billion) last year,
wholly blamed on the Kenyan units
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