Sameer Africa Limited, the only tyre manufacturer in Kenya, will close its manufacturing plant in the country from September 30 after an approval by Capital Markets Authority.
In a statement on Thursday, the company said the decision was necessitated by competition from cheap and subsidised tyre imports entering its markets and will therefore
commence offshore production by manufacturers in China and India.
“As a result, the company will incur a one-off charge in respect of plant and inventory impairment and employee severance costs estimated at approximately Sh725 million,” MD Allan Walmsley said.
“The earnings for the current financial year are therefore expected to be lower by more than 25 per cent of the earnings reported for the same period in 2015,” he added.
Since 2006, Sameer has seen a systematic reduction in its market share on account of cheap and subsidised tyre imports.
As a result, the high price market segment, where the company’s locally manufactured Yana tyres compete, has declined from a high of 62 per cent in 2005, to the current 25 per cent.
Walmsley said other factors like reduction in custom duties for tyre importation,
high cost of electricity and underutilisation of factory capacity have also impacted the business adversely and this will lead to loss of jobs in the factory.
But he assured of continued supply of the tyres in the country.
"We will also continue to expand our Summit Tyre offering for all markets and we will continue to distribute Bridgestone tyres in Kenya, Tanzania and Uganda,” Walmsley said.
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.
The company distributes tyres in Kenya, Uganda, Tanzania, Rwanda and Burundi.
Bridgestone Japan still retains a significant equity shareholding in Sameer Africa Limited of approximately 15 per cent.