Leading tyre maker Sameer Africa has become the latest victim of cheap imports after Eveready and Cadbury.
The firm will close its factory at the end of the month over imports from India and China which have flooded the market. The move will send an undisclosed number of workers home. This puts the country's 10-year manufacturing blueprint, launched September 2015 to revive industrial production, under the spotlight.
Sameer, which has been trading on the Nairobi Securities Exchange since 1995, said cheap and subsidised tyre imports have eaten into its market share, hitting hard its earnings.
It blamed the reduction in customs duties under the five-nation East African Community's Common External Tariff, high cost of electricity and continued operation below factory capacity for the closure of the factory which has been operational since 1969.
“High price market segment where company's locally manufactured Yana tyres compete, has declined from a high of 62 per cent in 2010 to only 25 per cent today,” the firm said in a statement yesterday.
The company has opened manufacturing contract negotiations with two undisclosed firms, one in India and another from China. The agreements, which are not subject to regulatory approvals, are expected to be sealed by September 30.
The struggling firm said it will incur Sh725 million one-off cost to cater for the reduction in the value of the plant and other machinery as well as compensation of staff to be retrenched.
This will further deepen its Sh15.65 million loss in financial year to December 2015 by more than 25 per cent, hence profit warning for this year to investors. Sameer on July 27 reported a 9.09 per cent drop in half-year profit through June to Sh43.59 million.
“The company has mitigated the number of workers to be retrenched by redeploying a number of workers to other continuing operations in retail and distribution,” Sameer said.
Its closure follows that of Eveready which chose to source dry cells from Egypt and Cadbury which decamped to South Africa in November 2010.
