Kenol to write off Sh1.8bn KPRL debt by December

KenolKobil CEO David Ohana. file photo | nmg 

By MUGAMBI MUTEGI

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Summary

• The oil marketer recorded the latest impairment of Sh300 million in the half year ended June when its net profit rose by a fifth to Sh1.4 billion.
• This raises the cumulative write-offs to Sh1.5 billion, leaving a balance of Sh300 million which will be provided for in the current financial year.
• Kenol’s managing director David Ohana said the clean-up of its books will boost the company’s future earnings

KenolKobil #ticker:KENO has said it will complete writing off a Sh1.8 billion debt owed by the defunct Kenya Petroleum Refineries Ltd (KPRL) in December after two and a half years of sustained impairments.

The oil marketer recorded the latest impairment of Sh300 million in the half year ended June when its net profit rose by a fifth to Sh1.4 billion. This raises the cumulative write-offs to Sh1.5 billion, leaving a balance of Sh300 million which will be provided for in the current financial year.

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Kenol’s managing director David Ohana said the clean-up of its books will boost the company’s future earnings.

“Over two years ago, the company made the decision to stop fighting...and impair the full debt,” Mr Ohana told Business Daily.

“We have been doing this progressively and we are now down to less than Sh300 million. The intention is to impair this amount in the current half of the year.”

Kenol has for years been claiming Sh3.1 billion from the defunct refinery as compensation for product losses incurred due to inefficiencies at the Mombasa-based facility.

The KPRL made a counterclaim of Sh1.2 billion from the oil marketer for allegedly defaulting on payment for petroleum products, leading to a stalemate.

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An audit conducted by Deloitte concluded that the amount KPRL owed all oil marketers was about Sh7 billion, with Kenol’s share recorded as Sh1.8 billion.

“The absence of this impairment cost in our books going forward will be a plus for the company,” said Mr Ohana.

Kenol, which has 195 outlets countrywide, on Wednesday announced that sales in the half year ended June just almost doubled to Sh72.6 billion. The sales however delivered lower gross margins.

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Mr Ohana said the revenue growth resulted from better performance across all its segments, more so increased Open Tender System (OTS) tenders and rise in sales to power generating firms because of the drought.

Kenol’s finance costs decreased 16.3 per cent to Sh82 million as it cut short-term borrowings by Sh2.45 billion to close the period at Sh4.8 billion, with Mr Ohana indicating the deleveraging will continue.

The company does not have long-term loans.