..the Finance Director needs to be investigated...he could be on the other side of the hedge...

Playing the stock market without insider info...is like buying a cow in the moonlight.

The hedges may have become a perfect excuse!!!....if you consider 1st half results we had Kshs1.26B as fuel hedge reserve in 2008/2009 compared to Kshs 2.79B reserve for 2007/2008 reflecting a reduction in the cost of hedging!!!!



The chief value of money lies in the fact that one lives in a world in which it is overestimated.

KQ did not apply IAS 39 to the 1H results. Essentially IAS 39 says that you mark-to-market (which KQ did in 1H results) & take the 'calculation' through your Income Statement (KQ did NOT do that in 1H or prior years).

*** A new CFO thus a new way of doing things. KQ used to account for the loss/gain in their balance sheet through Fuel Hedge Reserve as part of the Shareholders Equity.

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB

Yes,KQ losses piled up coz of hedges (ironical coz fuel prices have dropped). The hedges are at much higher prices (current oil at $65 but hedges taken when oil was at $140+).
**** KQ like most other NSE firms provides bare minimum information thus I am unaware of the notional amount of the hedges (mainly forward contracts).
**** Finance Director (generally) has to follow IFRS rules/guidelines. The exception to IAS 39's treatment was highlighted in the notes.
**** I think IAS 39 is a good rule but how it is reported) is where I question it... It makes the Income Statement jump all over for items whose values did not actually affect the firm's results in any significant way.
**** The fuel hedging loss is a LOSS. Let's be clear about that. But the loss will reverse (& overstate profits) in 1H 2009-10 if fuel prices have risen (all other things being Pari Passu) since 31 Mar 2009. Which they have.

Greedy when others are fearful,Very fearful when others are greedy - to paraphrase WB

Still haven’t seen the pdf but the hedge sounds like a self-strangulation policy (obviously thanks to the smiling bank) rather like East Africa Portland’s yen loan.


How much of its fuel was on this 3yr hedge?
Isn’t the whole point of a hedge that you monitor it on monthly basis (whether you are accounting for it in the P&L or not)?
Given the volatility of oil prices,isn’t better off just have 6 month rolling hedges covering differing proportions of fuel costs?



Shida ni ile ile. Naikuni has been in the job for too long and probably isn’t as driven as he once was…


www.mjengakenya.blogspot.com