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

I am waiting for the pdf. EABL does the best information dissemination.

* Yep,KQ was screwed. Poor financial advice from their financial advisors.
** They still have 210,000 mt spread over 1.5 years (31 Dec 2010) @ $110
*** Current price of oil is $68 ($50 or so on 31 March 2009)... implying an approx $28mn gain. Whatever good that does...
**** Monitoring by KQ must be done regularly. Bad advice did the rest... If I were CFO,I would have loaded up at $35-40 for current year use as well as a hedge against the hedge.
***** I did suggest that to a senior KQ manager that $37 was unsustainable considering the noises OPEC was making.
****** Rolling hedges are what they do but not for 100%. KQ's financial advisers dropped the ball.

####As regards Naikuni,expect a lot of opposition during the AGM. I miss the former CFO (an experienced hand in the airline business... Neil Canty)

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

The devil is in the details... read the thread from the beginning. And the dividend payout is not 20% (using the 'nominal' value means nothing)

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

guys we are screwed

according to my understanding about IAS 39 ( treatment of unrealised gains & losses)
it contradicts with hedge in that hedge is a contract to be excuted in future by the parties undersigned. so by this KQ has lost it for this year & next year they need not to beat around the bush by faking it it has happened & the have to abide by the contract.

If you judge people,you have no time to learn.

What are the actual figures? Capital says 4.1B and Nation puts it at 5.6B?

But again this is KENYA! Proudly!

if the incompetent and the reckless compete,the result is a disaster.. MN

kizee....5.66B what????

I got information it was a loss but didn't expect such a huge figure....please confirm!!!!!


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