Sameer Africa PLC, ( SAMR.NR) says it will witness a sharp plunge in Groups revenues by Ksh 1.49 billion with the closure of its tyre manufacturing plant in East Africa in Financial Year 2019.
The firm whose principal business is the importation and sale of tyres, said this is intended to ring-fence the key profit units and shift focus away from “the loss-making business units, grow the revenue base and capitalize rental segment of the business.”
In a cautionary statement announcing the exit from the tyre business, says “…despite the implementation of several changes in our business operations and strategy, the business has not improved, and survival of the company is and remains a major challenge,” Sameer’s chief executive Peter Gitonga wrote to Nairobi County Labour Office on April 24, 2020.
Since 2006, Sameer has seen a systematic reduction in its market share on account of cheap and subsidised tyre imports.
The firm now says it will capitalize on the rental segment of the business with a projected full-year profit in 2021 of Ksh 185 million against a forecast of Ksh 69 million this financial year 2020.
“The impact of this change is that the company will henceforth trade mainly in the rental business arena.”
However, it says it will incur approximately Ksh 223 million made up of Ksh 60 million being in payment of staff redundancy costs and Ksh 163 million being impairment costs on fixed assets as exit costs that will be accrued in the FY 2019 Financial Statements.
“Although the closure of the trye business will be based on 2019’s performance, reduce the Groups revenues by Ksh 1.49 billion, the profitability of the Group is expected to increase due to the elimination of losses that were generated by the tyre business over the last two years of over Ksh 1 billion.”
The Group owns a large property portfolio which includes: a 25 per cent stake in the 500,000 SQFT Sameer Business Park, located along Mombasa Road,
Muthaiga Heights, residential development along Thika Road, Rivaan Center, a 58,000 SQFT office complex off Waiyaki Way in Brookside, along with Muguga Green, and, the Sameer Industrial Park situated on the main Nairobi-Mombasa highway.
Sameer Africa Limited, under the name Firestone East Africa (1969) Limited, was established in Kenya in 1969 by Firestone Tyre, the Rubber Company of the USA and the government of Kenya to produce tyres for the East African market.
Sameer Investments Limited, a Kenyan company, later purchased a significant part of the shareholding from Firestone Tyre and Rubber Company, with the Yana brand officially launching in November 2005.