Total Kenya nine month profit dips 67%

Kenyan oil marketer Total has posted a 67 percent plunge in nine-month pre-tax profit after government price-capping squeezed margins, sales costs rose and volumes slipped in a tough environment.The company, part of French oil major Total SA, made a pretax profit of 195 million shillings ($2.1 million) and said it would have swung to a loss were it not for 200 million shillings income from the disposal of assets.Sales volumes dropped 5 percent to 685 kilo metric tonnes, as retail consumers, hurt by high inflation and a weaker local currency, made fewer visits to the pumps while bulk buyers placed lower orders.'These add to unfavourable market conditions facing the oil industry in Kenya such as the impact of price controls that were introduced in December 2010, but whose formula has not been recognising the deterioration of the macroeconomic environment," Total Kenya said.East Africa's largest economy has been beset by a surge in commodities prices this year, a severe depreciation of the shilling against the dollar, and soaring interest rates.Cost of sales rose 44 percent, outpacing 40 percent growth in turnover to just over 75 billion shillings, due to the impact of additional costs to the supply chain that were not passed onto the final consumer, thanks to the price review formula.The ministry of energy, through the Energy Regulatory Commission (ERC), sought to protect consumers from high prices when it introduced the monthly review of pump prices, which it caps at a certain level.'Total Kenya, which acquired Chevron's Kenyan business in 2009, issued a profit warning in October.'Were it not for the other income of 200 million shillings arising from disposal of several company assets in compliance with the conditions set by the government before the acquisition of the Chevron business, the company would have registered a loss in the first nine months," Total said on Wednesday.It said the operating environment had become very challenging with interest rates on bank loans and overdraft facilities at record levels.'It is therefore essential that the price formula ought to recognise the impact of these macroeconomic factors especially the cost of financing the working capital requirements and the inflation on costs, to allow for sustainable operations in the industry," Total said.
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