Weak Shilling Weighs Down Vivo Energy Sales

The weakening shilling, which has hurt foreign corporations that declare local earnings in dollars, has hurt Vivo Energy Kenya, the retailer of fuel products under the Shell brand, which reported a 15 percent drop in sales for the six-month period ending in June.

Vivo Energy Group Plc, the parent company of the oil marketer, reported that the Kenyan unit’s sales decreased to $785 million in the six months ending in June from $924 million in the same time last year.

Despite a decrease in earnings in dollars, the local unit equivalent calculated using the exchange rates in effect at the end of the relevant reporting periods shows an increase in revenue.

The shilling had an average exchange rate of 117.83 units to the dollar by the end of June 2022, which put the 2022 half-year income at Sh108.9 billion.

By the end of June this year, the value of the currency had dropped to 140.52 units to the US dollar, making this year’s revenues worth Sh110.3 billion.

Vivo did not break down the product volumes sold in the Kenyan market but stated that reduced volumes across its markets as a result of inflationary pressure on consumer spending caused its overall group gross profit to fall by a fifth to Sh41 billion.

The company also mentioned how declining currency values hurt profitability.

“Gross profit decreased by 20 percent year-on-year, from $362 million in half one of 2022 to $288 million in half one of 2023, mainly attributable to lower volumes because of reduced consumer purchasing power which was impacted by increasing inflation rates,” said Vivo Energy Group in a half-year performance brief.

“Decreasing crude oil prices as well as the depreciation of local currencies further contributed to the lower unit margins.”

Senegal’s income in other African markets increased by 5.2 percent to $486 million in the first half of the year, while Moroccan revenue fell by 7.9 percent to $816 million.

According to the most recent data from the Energy and Petroleum Regulatory Authority (Epra), Vivo Kenya owned a market share of 22.8 percent of local petroleum sales as of December 2022, leading TotalEnergies Marketing Kenya Plc (16.4%) and Rubis Energy Kenya (10.9%).

The use of super petrol and diesel declined by three and four percent to 669,793 cubic metres and 865,333 cubic metres, respectively, in the first four months of this year, according to Epra data.