UPDATE 2-Fuel bets cost plunge Kenya Airways into red
* Unrealised losses from fuel hedging hit bottom line
* Top line, passenger numbers and operating profit grow
* Shares shed 12 percent after surprise loss
(Recasts, adds details, shares)
NAIROBI, June 5 (Reuters) - Kenya Airways (KQ) (KQNA.NR) posted its first annual loss on Friday since privatisation 13 years ago after unrealised losses on jet fuel price hedges hit the bottom line and sent its shares plunging 25 percent. Ranked as one of the continent's leading airlines, KQ said it lost 5.66 billion Kenya shillings ($72.63 million) in the year to end March, compared with a restated pretax profit of 6.52 billion a year earlier.
Total revenue, however, rose 18.8 percent to 71.83 billion shillings on the back of growth across passenger, cargo and handling businesses. The airline's operating profit was 4.04 billion shillings, down 6 percent from the previous year.
The fuel hedge losses surprised analysts and KQ's shares fell 12.7 percent at the Nairobi bourse to trade at 19 at 1041 GMT compared with Thursday's closing price of 23.50 shillings.
Air France-KLM (AIRF.PA) owns 26 percent of KQ, the Kenyan government has a 23 percent stake and the rest is held by local and overseas investors.
The airline's Finance Director Alex Mbugua blamed the collapse of the oil price for shock results.
"In September 2008, all hell broke loose, it fell like the Titanic," he told investors, adding the company's fundamentals were sound. "This provision has no cash flow implications and the operating profit position is positive.
Kenya Airways said new accounting rules meant the airline had to book a 7.5 billion shillings unrealised loss on fuel derivatives to the end of 2010. It said if fuel prices did not change materially, the loss would be reversed in future periods.
BIG SURPRISE
The market did not see the loss coming because the company had earlier issued a 25 percent reduction profit warning.
"It is a big surprise to the market because for a long time the company has been profitable," said Peter Wachira, an investment manager at AIG Investments.
He said the airline could post better results for this year as the prices of crude oil were showing signs of recovery.
"We expect oil prices to go up, as the global economy comes out of recession, possibly next year, we will see the oil prices go up," he said.
Despite the loss, KQ declared a dividend of 1.00 shilling per share, amounting to a total payout of 462 million shillings from cash reserves.
Chief Executive Titus Naikuni said the board and senior management would make a decision on whether the fuel hedging policy was serving the firm well.
"If it comes out that going forward hedging will not be attractive to us, we won't hedge. But if it looks attractive to us, we will hedge," said Naikuni.
He said KQ was also considering whether to buy or lease new planes after the delivery of the much-anticipated Boeing 787-8 aircrafts was pushed back to 2013 from 2010.
The airline was hoping to use the dreamliners to replace six ageing Boeing 767s as part of its fleet modernisation. KQ's fleet of 28 planes is made up of Boeings and Embraer jets.
Naikuni said they were cutting costs in the face of the global slump but said flights to African destinations, its main area of focus, were increasing to create additional revenues. ($1=77.92 Kenyan shillings) (Editing by David Clarke and Mike Nesbit)
