youcan'tstopusnow wrote:"The two fold strategy of geographical expansion and diversification of the groups business lines has produced above expectations results, contributing strongly to the bottom line"
Diversification and Geographical expansion- spreading risk/diversify profitability lines:
*At Group Level % of PBT based on 1st Half 2011:
• Retail/Resell- 14%
• Commercial-7%
• Aviation- 17%
• Export-14%
• Trading Desk-11%.
• LPG- 8%
• Non Fuel- 5%
• Lubes- 4%
• F.O & Bitumen – 20%
With the above diversification, its clear why Total Kenya problems are not reflected in KenolKobil........Retail/resell of fuel (what we think is the core business of KK) and what is killing Total Kenya due to price regulation accounts for only 14% of group PBT.....Remember this 14% is based on all countries they have retail networks:Kenya,Uganda,Rwanda,Burundi,Tanzania,Zambia and Ethiopia. Assuming 1/3 of this retail business is attributable to Kenya (Check how the 400 fuel stations are geographically distributed per country), then that means the impact of price control introduced in Kenyalast year affects about only (1/3 x 14%) ie 5% of the PBT of the group. This is the power of business diversification both in terms of regions (reduces country specific risk) and products.
In fact, based on the above breakdown, KK derives 1/5th of its PBT from bitumen!!
Happy Hunting.
x handle: @stocksmaster79