Tuesday, April 12, 2005

Total AGM

Total Kenya Limited held it’s 51st annual general meeting (AGM) at the French Cultural Centre on Monday April 11. The company ended the year with sales of 37 billion shillings and a profit of 938 million before tax. This translated to earnings per share of 3.31 shillings and the firm declared a dividend of 2.50 shillings per share, payable after this meeting. Total is 78% owned by parent Total, and 21% by Kenyan shareholders ( 4,450 shareholders, 1,800 of whom own fewer than 1,000 shares) and 1% by employees.

The meeting began promptly at 3 p.m. Earlier shareholders had been given the annual reports, minutes (of 2004 meet), sheet to write questions and a goody bag (with an umbrella, polo shirt and baseball cap)

best part
This was the most interactive meeting I have seen. After Chairman (& Executive VP East Africa & Indian Ocean) Momar Nguer read his speech, and the auditor’s read their statement, he proceeded to go though most of the written questions submitted by shareholders after they had been seated. The number of questions was large, as people are less intimidated writing their questions, as opposed to being handed a microphone in a hall full of stranger. Anyway it led to a very insightful debate on Total; it’s competitors, the oil sector in Kenya. Here are some of the answers

- Chairman Nguer showed that Total had been gaining, was 18 shillings two years ago, 27 a year ago, now 40
- Under Nguer, has gone from the no. 4 company in Kenya in 1997 when he arrived to no. 1
- The company will not cut corners. A 28-year-old tanker ship used by a rival company caused an oil spill in Mombasa last week. Nguer said that ships over 20 years old are not widely used anymore, and are not allowed in European ports.
- Said there was no need for bonus shares as long as the company was giving dividends
- The company’s main social project is the “Total Eco Challenge” which seeks to plant 100 million trees a year in Kenya to restore forest cover while meeting demand for charcoal and other wood products (which provide for 80% of Kenya’s annual fuel requirements) in 2004 Total spearheaded the planting of 10 million trees

Kenol (Kenya Oil)
Competitor Kenol has been one of the hottest companies on the NSE and it’s share priced passed the 500 shilling mark, before it was split 10 to 1 – bringing the price to more affordable 50 shillings, from where it has risen to 64 (equivalent 640)

Chairman Nguer was put to task by some shareholders for posting lacklustre results compared to Kenol, having a flat share prices and generally being left 10 steps behind by Kenol. Nguer forcefully defended his company (he must have expected such questions because he had the 2004 accounts of Kenol with him) and tried to prove that Total was a better choice for shareholders.

- Nguer poured cold water on Kenol’s plans to expand into Ethiopia and Zambia. He’s the Total Chairman in those countries and said that any operation in (price-controlled) Ethiopia is very unprofitable while he’s never seen any presence of the company in Zambia.
- Claimed Kenol made a lot of non-oil income, including 226 million from the sale of commercial paper, while Total focused on its core operations only
- Said Total was giving a better return: 2.5 shilling dividend on a 40 shillings share versus Kenol’s 2 shillings on a 60 shilling share
- Admitted that he was confused by the Kenol’s accounts system and urged their shareholders to look at their books

Government of Kenya
- Has been detrimental to Total and the Oil Industry, and consumers of their products
- It is cheaper for Total and oil companies to import petrol and diesel into the country, but they are required to import crude and refine 70% at the government refinery in Mombasa. Unfortunately this also means higher fuel prices for motorists
- The government reneged on a deal to waive all taxes on cooking gas and cylinder’s (as it is with kerosene). Nguer believes that his is the only way to reduce the cost of cooking gas in Kenya.
- Government also reneged on an agreement it signed to mandate the use of low-sulphur diesel and unleaded petrol by 2006. Our Mombasa refinery cannot produce these fuels yet - and this has also prevented willing governments like Rwanda & Uganda (who import though Mombasa) from implementing the same.

Oil Industry
- Said contrary to public perception fuel prices go up and down, not just up.
- OPEC has proved ineffective in managing the price of oil
- Does not expect oil prices to go down any time soon owing to the great demand of China and Asia
- Oil is a low margin business, and profit come from increasing volumes, not prices
- Network fuel stations only contribute 1/6 of Total’s sales
- Is a tricky business to finance: $ interest rates are 3%, while shilling rates are 10%, and most suppliers have to be paid in $

Other shareholder questions
- asked why meeting were held in the afternoon causing people to get home late
- asked for umbrellas (which had got finished)
- asked for extra umbrella for wife at home
- asked for a job
- asked for a promotion for a certain worker
- asked Total to pay shareholder travel expenses

All the question session took up more than an hour, after which all the voting matters – dividend, auditor & director fees and re-election (the actual purpose of the meeting) were concluded in about ten minutes. The Chairman then invited shareholders for refreshments

worst moment
Refreshments after the meeting
Today, churches like All Saints Cathedral are honest enough to admit that they have thieves in their service and advise worshippers to watch their own pockets and not to leave bags unattended when they go for communion. Likewise Kenyan corporate giants should accept the fact that some of their shareholders only attend meetings to grab food and gift bags. The smash and grab scene in the food court of the French Cultural Centre was a sad spectacle. I suspect that some of the grabbers were no shareholders, since the registration and security at the meeting was quite lax.

I recommend that in future:
(i) give individual lunch bags (apologies for criticizing Barclays)
(ii) If they must serve meals at the meeting, employ ushers and arrange for groups to be served in sequence. It’s tough enough serving 1,000 civil guests at a wedding, so why should Total expect 1,000 strangers to behave themselves wedding- Total should have done the same as they dished out a limited supply of wine, juice, beer and bitings such as samosas, beef cuts, mini pizzas etc.
(iii) or give vouchers for meals and gifts – to be claimed on a day after the meeting e.g. vouchers for pizza at Total food courts
(iv) or don’t serve any food at the event.


daktari said...

wow..would really love to attend a kenyan AGM.it seems that although small shareholders have basically no say anywhere,kenyan management tries to be very accomodating even despite some 'tricky'questions.This is a far cry from what the government of the day does.

bankelele said...

I supoose the political equivalent will for MP's to chair monthly meetings on the status of constituency development funds issues

mwariwadavid said...

I've some shares in Total, but for the past 2 years, it is my worst performing stock.. it never goes up!


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