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Kenya Airways Stock Drops After Profit Misses Estimates

June 14 (Bloomberg) -- Kenya Airways Ltd., sub-Saharan Africa’s third-biggest airline, fell to a 2 1/2-month low after reporting fiscal-year profit that plunged more than analysts estimated because of higher fuel costs.

Kenya Airways declined 0.7 percent to 13.90 shillings at the close in the national capital, Nairobi, the lowest price since March 27. The stock has fallen 30 percent in 2012, the biggest drop on the Nairobi Securities Exchange All Share Index.

Net income slumped 53 percent to 1.66 billion shillings ($19.5 million) in the 12 months through March, Financial Director Alex Mbugua said at a briefing today in Nairobi. Profit was less than the 1.94 billion-shilling average of five analyst estimates compiled by Bloomberg.

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

Fuel will account for about 33 percent of airline costs, the same proportion as in 2008 when global oil prices spiked, the International Air Transport Association airline-industry group said June 11. African carriers will lose $100 million this year after breaking even in 2011, IATA said, sticking to an earlier forecast.

Kenya Airways’ 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.

Funding Plans

KQ, as the airline is known, plans to raise $3.6 billion over the next 10 years to fund an expansion that includes more than tripling the fleet to 107 aircraft from 34 and more than doubling its flight network to 115 routes from 55, the carrier said March 12.

“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 said at the press conference.

The airline said June 8 that it received 14.5 billion shillings through a stock sale after trying to raise 20.7 billion shillings to fund expansion. The World Bank’s International Finance Corp. spent 2 billion shillings to acquire a 9.56 percent stake in the airline, Mbugua said today.

Kenya Airways ranks behind South African Airways Ltd. and Ethiopian Airlines Enterprise among the biggest carriers in Africa south of the Sahara, 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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