Troubled tyre maker Sameer Africa Plc has shed 107 jobs and put up an undisclosed property for sale to ease its biting cashflow constraints and return to profitability.
The regional tyre distributor revealed through its 2020 annual report that it declared 107 positions redundant comprising management staff (75) and unionisable employees (32), translating to over Ksh245 million ($2.28 million) in staff cost savings during the year (2020).
The loss-making firm, which is listed on the Nairobi Securities Exchange (NSE) with operations in Uganda, Tanzania and Burundi, also plans to close several retail outlets this year and adopt a new business model for its wholesale customers where it will only sell to customers who have a history of prompt payment, cash sales and who are able to pay in advance.
According to the report, the firm also intends to focus on its rental business with a view to achieving a target of 100 percent occupancy including a “proposed sale of a property to facilitate stabilisation of the liquidity position of the company.”
“Following the change in the group business strategy, the Group plans to close several retail outlets,” the firm said. “The board plans to return the company back to profitability through various strategies.”
Sameer, which is 72.48 percent owned by Sameer Investments Ltd, closed its tyre manufacturing plant in Kenya in August 2016 and started contract manufacturing in China and India. However things did not work out well and in April last year the firm announced its total exit from the tyre manufacturing business citing difficult operating conditions for its turnaround.
Barely a year later in February this year the firm made a surprising move to reverse its decision to exit the tyre manufacturing business, arguing that the change of tune was prompted by the sustained demand for the ‘Yana’ Tyre brand and the intense turnaround plan launched last year. The firm said it will now be involved in contract manufacturing, import and distribution of tyres, with a new focus on property development and management
Last year, the firm’s total revenues declined by 57 percent to Ksh757 million ($7.07 million) from Ksh1.75 billion ($16.35 million) in 2019 largely due to the unavailability of key stocking units as a result of the planned closure of tyre business. The bulk (78.15 percent) of the group’s revenues accrue from the Kenyan operations with regional operations contributing a paltry 3.49 percent to the group’s top-line. These include Burundi (0.39 percent), Tanzania (0.56 percent) and Uganda (2.54 percent).
The group’s accumulated losses declined by 3.5 percent to Ksh1.1 billion ($10.28 million) from Ksh1.14 billion ($10.65 million) during the period under review. Its net debt declined by 18 percent to Ksh680.67 million ($6.36 million) from Ksh830.35 million ($7.76 million).
“The Board will continue to both challenge and support the actions of management as they work to ensure the Group transitions successfully over the next coming years to a more profitable and cash generating business in the future,” said the report.
Sameer Africa is involved in the sourcing, importation, and sale of tyres, tubes, and flaps and letting of investment properties. In Kenya, the firm has five branch operations, Tanzania three and one each in Uganda and Burundi. In addition, it has more than 20 retail tyre centres in strategic locations across all four countries.
In January, the group’s board approved a four-year (2021-2024) strategic plan anchored on both the company’s real estate portfolio and its extensive tyre industry experience as part of efforts to revert to the profitability path.
“The board’s decision to return to the tyre business reverses the earlier communication decision made on April 20, 2020 to exit from the tyre business,” the firm said.
Kenya’s Capital Markets Authority is working on the introduction of a recovery board where listed firms that are facing governance and liquidity challenges will be given time to get things in order before a decision on their delisting is undertaken.
The market regulator has reviewed the eligibility criteria for firms to be put on to this board prior to being delisted, in a new development that now exempts companies with working capital challenges from being pushed into the new board. The new criteria targets technically insolvent companies, firms under receivership and statutory administrations, companies facing corporate governance and management issues and high risk companies as primary candidates for the recovery board.
On the other hand, companies with working capital challenges that are considered “short term” have been given a helping hand under the reviewed eligibility criteria as they will not be put on to a recovery board.