Sameer said it would spend Sh223 million to close the tyre business. FILE PHOTO | NMG Sameer Africa #ticker:FIRE will henceforth focus on its real estate business after shutting down its tyre distribution unit, the Nairobi Securities Exchange-listed firm has told its investors.
The company projects that it will now return to profitability after exiting the tyre business that saw it make losses for years despite efforts to cut costs, including outsourcing production to India and China.
“The impact of this change is that the company will henceforth trade mainly in the rental business arena,” Sameer said in a statement.
Sameer’s current property investments include land holdings and stakes in Sameer Business Park (25 percent) and Sameer Industrial Park (100 percent), which lease space to tenants.
The company said although the closure of the tyre business will result in loss of revenues amounting to Sh1.49 billion, its profitability will rise due to the elimination of losses in the tyre division.
“The full-year profit projection in 2021 is forecast at Sh185 million, against a forecast of Sh69 million this financial year 2020,” Sameer said.
The company reported net losses of Sh529.3 million in the year ended December 2018 and Sh182.7 million in the half-year ended in June 2019.
Sameer said it would spend Sh223 million to close the tyre business. This comprises Sh60 million in retrenchment costs and Sh163 million on writing off fixed assets.
Shutting the unit will see 73 employees lose their jobs at the end of this month.
While Sameer’s tyre business has been shuttered, investors see a lot of value in its land holdings that it acquired cheaply decades ago. The firm has been reporting the value of its land as cost in its balance sheet.
