KenolKobil’s revenue grew 24 per cent year on year in the first half of this year thanks to increased international oil prices and volume growth. Compared to the first half of last year, the company’s revenue increased by eight per cent.
According to Kestrel Capital, international oil prices rose from $69.75 per barrel (Murban Crude Oil) in January this year to $77.20 per barrel in June 2018. As a result of this and the rising volume growth and LIBOR, local borrowing levels increased as well as the cost of dollar denominated loans.
Group earnings before interest, taxes, depreciations and amortization rose 14 per cent year on year to Sh3 billion compared to Sh2.7 billion in the first half of 2017. This was attirbuted to the reduced administrative and operating costs by 46 per cent year on year.
The decline in these costs was as a result of “efforts by the management to streamline the procurement processes, efficient cost management, and partly due to the absence of provision done in the first half of 2017.”
“This is slightly below our expectations, although we anticipated slower than expected activity in some key segments in the first half of the year,” Kestrel said.
KenolKobil’s gross profit margin stood at 4.0 per cent compared to 5.6 per cent in 1H17. The margin in 2018 was “weighed down by pressure on margins on products in various markets where the Group operates.
The oil company’s earnings per share surged to Sh1.12 in the first half of 2018, an increase of 16.1 per cent year on year. This was higher than Kestrel’s prediction of Sh1.02. Additionally, the Board agreed on an interim dividend of Sh0.36 per share compared to Sh0.30 in the same period last year.
“Given KenolKobil has demonstrated ability to manage inventory to deal with volatility in international oil prices and an expected improvement in the general Kenyan business environment in the second half of the year we believe the Company to have a potentially stronger performance in 2H18. We remain optimistic on the company driven by growing subsidiaries and the company’s continued push in core business segments. We maintain our BUY recommendation on the stock,” Kestrel Capital surmised.
