The auto firm recorded a net profit of Sh181.5 million in the year to March compared to a loss of Sh344 million in a similar period last year in spite of its sales dropping to Sh263 million down from Sh604 million last year and Sh1.3 billion in 2007.
This was helped by the waiver of a Sh401 million loan borrowed from KCB by businessmen Ketan Somaia, who lost the battle for control of the auto firm to tycoon Kamlesh Pattni last year in a spat that lasted four years.
Directors and executives friendly to Mr Pattni successfully went to court and argued that the loan was issued irregularly at a moment when Marshalls did not have a board to approve the monies.
“The lender waived the outstanding loan amount after a two-year appeal by Marshalls, which proved that the loan was taken without the backing of the full board,” Mr Sanjiv Shah, the CEO of Marshalls East Africa told the Business Daily in an interview.
The firm reported a net loss of Sh319 million excluding the one- off loan waiver—extending its loss making streak to four years.
The loan, which was borrowed in 2006, had grown to Sh808 million at the end of March 2010 and Marshalls provided Sh469 million as an expense on its books pending the outcome of the court case.
“Currently there is an injunction against KCB restraining it from a appointing a receiver over the company or its assets or realising any of the assets that were used to sure the borrowing,” Marshalls told its shareholders last year.
KCB was caught in a vicious infighting at the company’s boardroom pitting Mr Pattni and Mr Somaia that led to frequent changes in the firm’s executive suite and directorship, exposing the bank to the losses.
Mr Pattni has always insisted that he bought a controlling stake in Marshalls estimated at 65.5 per cent, but argued that Mr Somaia had refused to transfer the shares, prompting the courts to rule in his favour last year.
The shareholder spat saw Marshalls end up with six CEOs in three years, a turnover that has hampered the firm’s ability to develop long- term strategy and hire top talent in the increasingly competitive auto sector.
Besides the board wrangles, a thin product line and sluggish sales in Kenya’s new vehicle market has helped rivals such as General Motors, CMC and Toyota munch its market share, which seen its sales fall and a deepening of losses since 2007.
It terminated the Peugeot franchise in 2007 ending the 47-year partnership Marshalls had with the France-based firm. Investors have taken notice as its shares have become the least sought after at the Nairobi Stock Exchange and goes for weeks without trading at the bourse.
Its share price stood at a year low of Sh11.40 on Friday, having shaved off 20 per cent over the past six months and has remained unchanged in the past month due to non-trading.
Marshalls East Africa is betting on luxury and commercial trucks market with new models from Ashok Leyland, Audi and Force Motors to return to profitability.