Results & Announcements:
The headline will be that KQ posted an eye-watering loss for 2009 (the largest in Kenya's history?), but
- Turnover was higher than prior yr across board though some of this was due to the slightly stronger Ksh over the period
- Passenger numbers were either higher or flat in all the its flight regions
- If you remove the hedging strategy's P&L impact from both yrs, KQ had a higher PAT than 2008
- operating profit was lower driven by higher costs, which is not good especially if the $ strengthens this year
- the hedge was/is a mess and there is no getting around that. Mark to market is not the issue because that is international accounting standard. KQ would still have incurred the realised losses of Ksh1.4bn. You can't hedge a large portion of your fuel for 3yrs at $120 when the oil price has never gotten that high before. It’s similar to the way you won't buy a share at near its highest price. A 6 or 12 monthly rolling/calendar hedges might have been more ideal to allow recalibration of KQ's hedging strategy to oil futures.
EABL's CEO Gerald Mahinda move is a bit strange. He has presided over a very successful spell at EABL and its a bit of a surprise he wasn't given a bigger job as say MD for the African operations. His replacement seems a relative novice into the Kenyan market. An opportunity for Keroche?
Economy will move sideways this year and with remittances down expect interest rates to have to rise at some point to help bridge the budget gap.
FTSE and other markets:
Staying well balanced. Barclays went down well below £3 as expected but has since resurged as it confirmed BGI sale. Next test for all banks is the performance of govt bonds which may end up forcing interest rates upwards.