By Morris Aron
Leading oil marketer, KenolKobil made the wrong bet on foreign exchange trends forecast in the first half of the year, that saw the company bear exchange losses of Sh4.2 billion.
Late on Friday, a statement from the largest regional oil marketer, said that as a result and in addition to the rising cost of sales, the firm registered a Sh5.68 billion loss before tax.
“Sharp falling international oil prices since the end of last year, exacerbated by the accelerated downward price adjustments by regulators...put gross margins under pressure in the period under review, particularly in the first quarter when high stock levels carrying high costs were being disposed off,” read the statement.
“The most significant impact was the losses from foreign exchange hedges taken in the latter part of last year and the first two months of this year.”
KenolKobil had hedged against the shilling fall and had forecast that the shilling would continue to depreciate or stabilise at around Sh100 to the dollar.
Exposed
The contract protected KenolKobil during periods of depreciation of the shilling, but would have exposed it in times when the currency appreciated, as it is an agreement to buy foreign currency at a pre-determined rate.
So when the interventions by the Central Bank and the World Bank saw the shilling appreciate and stabilise at Sh84 to the dollar, the company lost out, analysts say.
Financial books released on Friday indicate that over a similar period last year, KenolKobil recorded a Sh3.27 billion as profits when a hedging positions taken against the exchange rate cost the company only Sh842 million.
Despite the rising cost of sales, price of buying or making an item that is sold, which stood at Sh101 billion in the first half of this year, KenolKobil registered an increase of 17 per cent of the volumes sold.
The previous year, KenolKobil sold products worth Sh103 billion compared to Sh83 billion the previous year.
