@Aguy @Kausha
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KenolKobil FY15 Conference Call Hosted by Kestrel Capital (E.A.) Ltd
Good morning guys. We just came from an investor conference here in Nairobi. The main news for this is our ability to close that deal in Tanzania, which was loss making business for us. We are quite excited because this year
for the first time, 2016, we are not going to carry this loss making business within the group.
We are expecting to see
subsidiaries contributing much better to the bottom line. Subsidiaries traditionally were making money, but then we were hit by that loss.
Those 2 operations, although in Lubumbashi, we never really had operation, just an asset, we are very excited.
Actually I’m wording with my team, mainly with the M&A guy close to 2-1/2 years of this Tanzania deal, very easy to enter but very complicated to come out, getting or penning the approvals, but at the end, we managed.
We got fully paid the whole amount that we were chasing.
2016 started very well.
Jan and Feb record months for us, so we are quite excited.
March so far looks okay, very okay actually. That’s all.
We are a sound business.
Less risk, less litigation, sticking to high margin yields as lubricants, LPG, service stations. We are very much focused from last year, from 2015, on the
Kenya operation adding station. We
added 12 within 2015, but generally in the operation
in all countries, we added 21. That’s what we are
focusing this year, mainly on the Kenyan market. That’s all.
I see great results coming 2016, but it’s still early stage, but for 2 months, Jan and Feb, we are quite happy with.
David Ohana, Group MD KenolKobil:
Good question. Look, debt free, I decided to be more cautious in the commentary and say within the year, but yeah, up to yesterday morning, it was still
within the first half. Still stands, and I think very much realistic. We are 2.3 or
23 million dollar to make it easy for you this morning. We follow it daily. Yes, I still believe it’s achievable within first half. If it will not be first half, it will be within say July. It’s still there, yeah.
About the service stations, the
target number for the marketing team is 20. We are trying to focus on Kenya mainly. We added in other subsidiaries like Burundi and Rwanda a lot over the years. The
yields from Kenya, the volumes are quite strong.
If we do bad, I mean it will not pick enough, so it will be 15, but already I signed this week 3, and we are about to [inaudible 00:24:43] another 4 or so, so in a way,
we are halfway covered in Feb. I believe it will be a
very strong year for the local M and A, the takeovers what we call in Kenya.
I inherited of court cases, which
we settled many by the way. It’s the
KPC, they need to pay us, but as I said, we are trying to settle whatever. There is dialogue with them.
I believe and I pray that within the first half, it will be resolved. The targets are earlier, but to be conservative, first half 2016, I hope to be out of it.
David Ohana, Group MD KenolKobil:
For the last 3 years, I’m talking about
short inventory with a short squeeze actually. That’s what helped us to recover faster within the last 2-1/2 years. You know luck is part of business. We were lucky that oil prices crashed. Imagine if they were going 150, probably we were not having this call today.
Luck is always part of business. I’m very cool if prices will go up. It’s much easier to manage in a contango market. Not that I’m happy that price is going up. I’m not.
I still believe oil prices will remain low, maybe just more volatile, but volatile gives us a better opportunity to make quick returns.Profits so to say.
Yeah. We are very cautious with the inventory. I’m
managing it myself for the group with my great supply manager. I think if you see the 2015 result, a [lot to do 00:27:12]
massive creation of margin came from the stock management. For me, cash and stock is where I’m putting my weight. Although whoever knows me, I’m involved in most of the issues, but those things I’m taking it myself. Yes, we are going slightly longer now, but not to tell you that I go long because I told you I think market will crash again. I think traders and speculators are deeply in the market.
Fundamentals are still talking about the market that’s been oversupplied. Iran just back to the market, not to maximum production capacity. Same for the Saudis. I don’t want to talk about Russia, which below their budget for the year. They need the oil prices to reach 70, 80 to be able to break even their budget, so no one can cope with the reduction in production. That’s what makes me to believe that the oil prices will crash or will continue staying low, crashing within the belt of 20 to 40, 45. All these levels are very comfortable for us while we don’t borrow much. I think we are standing a chance for a great deal.
Just to give you the feeling, Jan, but I’ll not talk about Feb because I can’t give you too much information.
Jan, we had GPO 15%, just to show you the power of management of inventory, remember [per day 00:28:38] I published 6.7. Quite happy with 2016. Again, while
finance cost is going to be almost eliminated, I think we are closing an exciting year, and we are in the process of a much more exciting year, which is 2016.
By first half 2016 to try and make it debt free. How to which, there it’s the same way we reach from 160 million dollar debt 2-1/2 years ago to 20. It’s in the same strategy,
tight treasury control. Again, as I mentioned, I’m very much involved there. Just system of paying every month debt. Again, we prove to ourselves that we can do it. The last stretch, I see it a bit easy.
We took some action recently without going into the details.
I believe around I should say mid-May, we’ll crack even the 1.5 level, and then all the way down. There is some. I can’t be detailed here. I can’t give you all this information, but we took some actions recently in the last 3 weeks, and
I believe soon we are going to be below 2 billion in matter of 2, 3 weeks.We have no plans to exit any other countries, simply no. There is no discussion. Same way that I have no plans as it stands now to enter to any new country.
All countries we are happy with, profitable. It’s just
strengthen each and every country by management, by young employees, balancing the gender, all the things I talked in the commentary.
We are at 23, 2.3 billon today, so I believe in 2 weeks. That is the reason why I’m telling you, inflows that we are expecting,
then that thing will be smashed. We have a little program. It’s not that I’m telling you debt, and I’m sleeping well at night, good dream, and then I’m telling you debt free. It’s a very structured system.
On the lubricant plant with the BP South Africa, they were actually here this week. They traveled back yesterday. It’s a new market for them.
Yes, we identify where we want to be, where we want to be blending, but I want to do it with them. We don’t want to do it alone because it’s a strong brand. I’m still importing from them from South Africa.
About the growth in volume, you see for the year, it’s 13%, but when you take January 2015 compared to January 2016,
January last year, I sold around 65 million liters. In January this year, we sold 92. It can give you a feel how it moved, where are the areas where we grew it in the network. Last January, we were selling with this additional service stations,
we were around 18, 19 million. This January, we were close to 24, so
big jump in network volume where the margin is. I grew in aviation. Also
aviation, we are doing lovely. In the last few months,
nice massive contribution from Jet.
@VVS note: No KQ, thank you! Those are the areas. Yeah,
fuel oil, we are also big. It was
massive sales in December. We were
quite active on the fuel oil front and quite profitable.Yeah, it’s still something, but we are trying to live by the day. It’s not that you can do everything. Mozambique, it’s exciting market, which when you look at it and study, South Africa equally big country.
The long term is yes, it’s to expand, but not in the immediate term. Yeah. The main issue is [look at 00:40:09] the year started strong, that’s what I can tell you, on a much healthy basis which is without Tanzania.
The upside that I see strengthen in 2015 is not having loss from TZ. The second one I
don’t see has been hit by exchange. We have a very balanced inflows of dollars versus our liabilities which is around 23 million dollars as of today. I see actually a potential.
In the first 2 months, we have actually a gain on exchange. If you put the 2 numbers together from 2015, 230 plus 460, if all being equal,
we will have an upside of 5 million dollars before we started the year. 
Yes, 2 months ago,
we are in exchange gained and zero losses I promise you in Jan and Feb from Tanzania. We started well.
In 4 months, probably around August, you see the 6 months , and probably we’ll have another call to explain.
Things look bright here.Greedy when others are fearful. Very fearful when others are greedy - to paraphrase Warren Buffett