The troubled Uchumi Supermarkets plans to mobilise more than Ksh900 million ($8.57 million) from the closure of 10 branches in Uganda and Tanzania.
The Nairobi Securities Exchange-listed retailer said the perennial loss-making regional subsidiaries only constitute about five per cent of its business while accounting for the bulk (more than 25 per cent) of the group’s operating costs.
“Kenya has been subsidising the subsidiaries,” Uchumi chief executive Julius Kipng’etich told The EastAfrican, adding that the additional funds to pay off short-term creditors would be raised from the sale of non-core assets such as land and buildings.
The proposed measures are designed to help stabilise the operations of the loss-making firm by December this year.
Uchumi shares will however continue trading on the Uganda Securities Exchange and Dar es Salaam Stock Exchange.
Its stock on the Nairobi Securities Exchange is currently trading at around Ksh10 per share.
The firm owes suppliers a total of Ksh2.3 billion ($21.91 million). In June the retailer secured a loan of Ksh500 million ($4.76 million) from KCB to clear part of the debts.
The retailer’s total branch network stands at 37 (27 in Kenya, four in Tanzania and six in Uganda).
Plans to open 13 more branches across the region this year hit a brick wall after the former management was sent packing over claims of gross mismanagement of.
Uchumi was first put under receivership in June 2006 and its shares suspended from trading on the NSE after a botched expansion strategy that plunged the firm into financial distress, with debts totalling Ksh2.2 billion ($20.95 million).
Three and half years later, in 2010, the receivership was lifted following an agreement by the creditors — KCB and PTA bank— to convert their loans into equity.
The retailer was relisted on the NSE on May 31, 2011, after a five-year suspension.
Uchumi is fighting for survival in Kenya’s retail space, currently controlled by Tuskys, Naivas and Nakumatt, with France’s Carrefour preparing to commence operations in the country at the end of the year.
The Uganda and Tanzania subsidiaries have not recorded any profit over the past five years.
During the past financial year (2013/2014) Uchumi’s total sales grew marginally by one per cent, held back by a decline in sales in Uganda and Tanzania.
The group’s profit fell 6.8 per cent to Ksh453 million ($4.31 million) from Ksh486 million ($4.62 million) in the previous year (2012/2013) mainly attributed to losses emanating from regional subsidiaries.
The government of Uganda last week reportedly summoned the top management of Uchumi over the closure of branches in the country which rendered more than 400 workers jobless without a clear-cut plan of compensation.
It is argued that the manner in which Uchumi shut down its operations in Uganda violated the country’s employment law.