Kenya Airways Annual Profit Halved by High Fuel Prices

Kenya Airways Ltd. (KNAL), sub-Saharan Africa’s third-biggest airline, extended its decline after saying full-year profit plunged on higher fuel costs, missing analyst estimates.

The stock fell 0.4 percent to 13.95 shillings as of 11:30 a.m. after having remained unchanged in the two previous trading sessions. In the five days prior to that, the shares retreated 7.3 percent.

Net income slumped 53 percent to 1.66 billion shillings ($19.5 million) in the 12 months through March from 3.54 billion shillings a year earlier, Financial Director Alex Mbugua said at a briefing today in Nairobi. The mean estimate of five analysts surveyed by Bloomberg was for a fall to 1.94 billion shillings. This is another challenging year, the International Air Transport Association, which represents 240 carriers, said on its website, referring to 2012. “We expect revenues of $631 billion but a profit of just $3.0 billion. That’s a 0.5% net margin.”

“The issue in our lives is fuel,” Mbugua said. “The total fuel cost is now 40 billion shillings.”

Full-year revenue climbed 26 percent to 107.9 billion shillings, while costs jumped 45 percent to 77.2 billion shillings, Mbugua said.

“At least they have remained profitable and they have alluded to major changes on procurement of oil which may have a major positive impact,” Eric Musau, a research analyst at Nairobi-based Standard Investment Bank Ltd., said in a phone interview today.

KQ, as the airline is known, plans to raise $3.6 billion over the next 10 years to fund an expansion that includes expanding the fleet to 107 aircraft from 34 and more than doubling its routes to 115 from 55, according to a company statement March 12.

Stock Sale

“We have already started the negotiations on funding and we should be able to conclude in the next month or two,” Chief Executive Officer Titus Naikuni told reporters in Nairobi today.

The airline, based in Nairobi, said June 8 it received 14.5 billion shillings through a stock sale after having sought to raise 20.7 billion shillings to fund its expansion. International Finance Corporation spent 2 billion shillings to acquire a 9.56 percent shareholding in the airline, Mbugua said today.

KQ traded unchanged at 14 shillings by 10:42 a.m. in Nairobi. The stock has fallen 29 percent this year, the worst- performing company on the Nairobi Securities Exchange, according to data compiled by Bloomberg.

Kenya Airways ranks behind South African Airways and Ethiopian Airlines Enterprise, which are sub-Saharan Africa’s two biggest carriers, according to IATA.

To contact the reporter on this story: Eric Ombok in Nairobi at eombok@bloomberg.net

To contact the editor responsible for this story: Paul Richardson at pmrichardson@bloomberg.net

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