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2016 – a Game-Changing Year for Sameer Africa as it Plans for a Profitable Future

NAIROBI, June 9th, 2017…Sameer Africa Limited, which was until 30 September 2016 the largest independent tyre producer in East and Central Africa, posted a pre-tax loss of Kshs 865 million in 2016, compared to a profit of Kshs 5.69 million in 2015. One-off factory closure and other impairment costs of Kshs 877 million, combined with tight liquidity across all markets, ever-increasing competition from subsidized Chinese tyres, currency volatility in regional markets and severe foreign currency shortages across the export markets, all impacted adversely.

Group revenues declined by 14% to Kshs 2.9 billion compared to Kshs 3.36 billion in 2015. Gross profit also declined to Ksh 584 million, compared to Ksh 962 million in 2015, but in line with factory closure costs and impairment charges on raw materials and factory equipment of Kshs 325 million.


The decline in the Group’s revenues has been systematic since 2012, in line with the emergence and growth of the Chinese tyre industry. As a result, and as advised last year, a new strategy was developed by the board in order to protect shareholder value against this very significant risk moving forward. This strategy involved the closure of the manufacturing plant in September 2016, and the outsourcing of Yana tyre production to lower cost jurisdictions in China and India.
Group chairman, Eng. Erastus Mwongera noted that before re-organisation and impairment costs of Kshs 877 million, the group recorded a pre-tax profit of Kshs 12 million.


The chairman, told shareholders that revenue from the tyre business declined by 13 per cent in 2016, and reiterated that this was as a result of a significant drop in Government purchases, increasing credit indiscipline, ever-increasing competition from subsidised Chinese tyres and in line with an export market that essentially collapsed in 2016 due to widespread hard currency shortages and civil unrest.
Channel performance was mixed with a notable growth in sales to original equipment manufacturers (155%) and Yana Tyre Centres (28%). However, the decline in sales to both the dealer trade (20%) and the export market (47%) reversed these gains.
Eng. Mwongera however, noted that despite the challenging operating environment, the Group’s decision to outsource tyre manufacturing will increase its competitive advantage and strengthen the business for growth moving forward.


“In 2016, the Group continued to focus on its key strategic thrust of profitable growth and aggressive cost reduction efforts” he said.
According to the Group’s Integrated Annual Report for 2016, the Group continued with its program to reduce both factory conversion costs and operating expenses in a bid to protect margins, an initiative that contained overheads at below 2015 levels, before impairment and other closure costs.


Cost saving initiatives however, provide diminishing returns only and cannot indefinitely offset the impact of declining sales. This largely informed the strategy to discontinue on-shore manufacturing and transit to multi-sourcing of Yana brand tyres from more cost friendly manufacturing jurisdictions.

The chairman noted that the outsourcing strategy has enabled the Group to upgrade and revamp many of the Yana tyre patterns and also to incorporate all of the latest tyre technologies available. “We will also be able to take advantage of the economies of scale that large tyre manufacturers enjoy in terms of ‘factory gate’ production costs”, noted Eng. Mwongera.
The tyre manufacturer has announced negative earnings per share of Kshs 2.34 in 2016 compared to KShs 0.06 in 2015.
Nevertheless, the Group projects future profitability pegged on wholesale tyre distribution, retail motor vehicle solutions, property leasing and property development.
Ends……


NOTES TO EDITORS
Sameer Africa Limited, under the name Firestone East Africa (1969) Limited, was established in Kenya in 1969 by Firestone Tyre and Rubber Company of the USA and the Government Kenya to produce tyres for the East African market.


With a technical capability developed over 47 years of producing tyres in Kenya, the company has, until September 2016, been producing a comprehensive range of tyres to meet customers’ needs in Africa under the Yana brand name. In September 2016, the manufacture of the Yana brand was moved to plants in China and India.


Sameer Africa’s product range currently includes: passenger textile and steel belted radials, 4x4 tyres, light truck radial and bias, truck and bus, agricultural, industrial and off-the-road tyres. Sameer Africa stocks both tube type and tubeless tyres and also tubes and flaps.
The Yana brand, officially launched in November 2005 in Nairobi, is Sameer Africa’s own brand which has become a pan- African tyre brand. This brand is backed by leading tyre technology and is engineered by Sameer Africa to meet the challenging driving conditions in Africa.
In 2014, Sameer Africa introduced Summit Tyre, as its second tyre brand to serve the fast-growing discount market segment currently dominated by brands from Asia. The brand is an appropriate and affordable tyre that delivers value for money without compromising on performance.


Manufactured in China under license to Sameer Africa and with all the technical specifications developed by Sameer Africa, Summit tyres offer quality and performance in a more affordable way and hence the tagline ‘Good Tyre, Great Value’. The brand covers passenger, 4x4, light truck, medium truck and truck & bus tyres
Sameer Africa Limited also distributes the world renowned Bridgestone tyres in Kenya, Uganda, Tanzania and Burundi.
The Group has physical presence in Kenya, Uganda, Tanzania and Burundi and exports its products to other countries in Africa.


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For more information, please contact Margaret Mboga - Brand & Communications Manager- Sameer Africa on 396 2308, 396 2000 or 0734 677 414 email This email address is being protected from spambots. You need JavaScript enabled to view it.

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