FINANCIAL MANAGERIAL ACCOUNTING ANALYZING FINANCIAL REPORTS KENOLKOBIL LTD

FINANCIAL & MANAGERIAL ACCOUNTING ANALYZING FINANCIAL REPORTS KENOLKOBIL LTD SYNDICATE 1 12 TH AUGUST 2014 Andrew Massawe Paul Abutto Stephen Mukasa Jane Mumbua Rose Gitonga Mark Mwongela

INTRODUCTION The Kenol. Kobil Group • Africa’s indigenous oil marketing conglomerate with an expansive investment portfolio spanning the entire Eastern, Central and Southern parts of the African continent • Operates in the energy sector and trade in both crude and refined petroleum products which include motor fuels, industrial oils, LPG, aviation fuels, lubricants and various other specialist oils

SUMMARY PERFORMANCE SUMMARY • 2012: Net Loss of KShs 6, 284, 575, 000 • 2013: Net profit of KShs 558, 419, 000 What were the key changes to achieve this turnaround?

SUMMARY OF CHANGES KEY CHANGES IN THE COMPANY • Reducing financing by optimizing inventory, reducing borrowing and re-negotiating interest rates on bank loans • Exchange rate losses reduced with reduced borrowing • Administration and operating costs reduced • Distribution costs were reduced • Operational streamlining and the need for increased efficiencies resulted into a reduction in workforce within the entire group.

KEY INCOMES ITEM Sales Other income 2013 2012 CHANGE COMMENTS (KES ‘ 000, 000) 109, 687 192, 527 (82, 840) Change of sales mix by focusing on high margin sales and exiting low margin businesses 1, 403 483 920 Disposing of non-performing assets across the group to improve efficiency and profitability.

KEY EXPENSES ITEM Cost of sales Distribution costs Administrative costs Net foreign exchange loss Interest Expense 2013 2012 CHANGE COMMENTS (KES ‘ 000, 000) 104, 661 188, 239 83, 578 Change of sales mix by focusing on high margin sales and exiting low margin businesses 761 996 235 Change of sales mix by focusing on high margin sales and exiting low margin businesses 3, 369 5, 860 2, 491 Operational streamlining thus reduction 105 4, 606 4, 501 Control of Forex hedging. 1, 672 2, 351 679 Reducing financing thus interest charged on loans reduces

KEY CASHFLOWS ITEM Cash flow from operating activities Cash flow from investing activities Cash flow from financing activities 2013 (KES ‘ 000, 000) 2012 CHANGE COMMENTS (KES ‘ 000, 000) 1, 297 2, 956 (1, 658) • Change of sales mix by focusing on high margin sales and exiting low margin businesses • Optimizing inventory, reducing borrowing and re -negotiating interest rates on bank loans. • Operational streamlining and the need to increased efficiencies resulted into a reduction in workforce 470 1, 163 693 Proceeds from disposing of non-performing assets across the group 1, 247 2, 886 1, 639 Reduction of financing translating into less outflow Dividends contributed to the reduction

KEY ASSETS ITEM 2013 (KES ‘ 000, 000) 2012 (KES ‘ 000, 000) CHANGE (KES ‘ 000, 000) COMMENTS NON-CURRENT Property, plant, and equipment Pre-paid operating lease expense Intangible Assets 4, 668 4, 284 384 601 609 (8) 858 872 (13) 6, 528 8, 884 (2, 356) 10, 757 13, 085 (2, 328) 1, 775 2, 191 (416) CURRENT Inventories Receivables and prepayments Cash and cash equivalent Operational streamlining and the need to increased efficiencies resulted in additional acquisition of assets Other charges including depreciation A result of amortization charge offsetting additional operating lease rentals Amortization of the intangible assets No new additions were made and the drop in net values was only due to Optimizing inventory to reduce financing and borrowing and re-negotiate interest rates on bank loans. Trade receivables decreasing Result of change of sales mix by focusing on high margin sales and exiting low margin businesses. Compares positively achieved due to turnaround strategy adopted in 2013

KEY LIABILITIES ITEM 2013 (KES ‘ 000, 000) 2012 (KES ‘ 000, 000) Payables and accrued expenses 5, 591 9, 113 Borrowings- short term 14, 854 15, 947 522 668 Borrowings- long term CHANG E (KES ‘ 000, 00 0) COMMENTS As(3, a result of optimizing 522) inventory as one of the strategy is the main cause of the drop Total (1, borrowing was reduced 093) as a result of managing well the trade receivables, inventories as well as on cash flows from investing and financing activities. See comments ( under short 146) term borrowings

KEY CAPITAL ITEM Total equity 2013 2012 CHANGE COMMENTS (KES ‘ 000, 000) 6, 666 6, 446 221 Operating activities generated an increase Re-evaluation loss ESOP reserves & translation reserve Retained profits

SUMMARY CONTINUED FOCUS • Focusing on resolution of disputes • Reduction in structural complexities • Control of Forex hedging • Trading activities and capital investments • Change of sales mix by focusing on high margin sales and exiting low margin businesses Realize better results in 2014

REFERENCES References 1. 2013 Kenol. Kobil Limited Annual report & financial statements - africanfinancials. com 2. Kenol. Kobil Profil 0 e - kenolkobil. com