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Kenya: Press Release: Sameer Africa embarks on recovery strategy. |
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Thursday, 31 July 2008 |
July 29th, 2008… Sameer Africa Ltd is adopting a recovery strategy in the second half of the year as a result of reduced sales and profits that followed a difficult first half of the year.
During an investor briefing event at the Serena Hotel the Managing Director Mr. Michael Karanja said according to their half year results, the company had experienced reduced sales and profit when compared to the same period last year and has just managed to break even in the first half.
Sameer Africa had issued a profit warning in May 2008 indicating that its performance, though expected to remain positive, would be less than budgeted as a result of among other reasons;-
- Difficulties experience in the first quarter of the year when key regions mainly Rift Valley and Western Kenya were rendered inaccessible due to the post election violence; Transfer of the company’s products to Uganda was also disrupted resulting in Uganda not achieving its targets for the first half.
- Logistical challenges including road and rail transportation disruptions resulting in congestion at the port of Mombasa. The caused delays in clearing key material affecting continuous tyre manufacture;
- Sharp increase in the prices of key raw material used in tyre manufacture most which are petroleum based. A 26 percent increase in petrol prices since January 2008 has had a huge negative impact on tyre manufacture globally. For Sameer Africa natural rubber prices have increased by 38pc since June 2007 to June 2008, synthetic rubber has risen by 25pc while carbon black has shot up by 21pc over the same period.
Mr. Karanja told the investors that as a consequence, the company has reported reduction in sales as well as profit before tax for the half year to June 2008 compared to the same period last year and that the company just managed to break even in the first half.
The MD outlined key elements of the recovery strategy that is under implementation which will have a positive impact in the second half and the whole year outturn. Starting with the initiatives in Sales and Marketing, the MD said the company will put increased efforts in protecting their profit margins by supporting and focusing on products and brands that give them better returns.
“The company has strong brands around which the recovery strategy is built”, said the MD. Yana, a tyre designed with Africa’s tough driving conditions in mind and is renowned for being durable and reliable is Sameer Africa’s leading brand while its other key brands which it distributes throughout East Africa include Bridgestone and Firestone. Sameer Africa is also the local agent for Dunlop South Africa and Hankook.
Sameer Africa also plans to expand its retail outlet by establishing five new Yana Tyre Centres (three in Kenya and two in Tanzania) in addition to the current six which are contributing nearly 10pc of the company’s revenue.
The company, now selling tyres in more than 10 export countries in the Eastern and Central Africa region, will continue to grow the export business, which has grown rapidly over the recent years to contribute more than 30% of the total company revenue.
The MD also highlighted that the company plans to introduce a number of new products to serve specific and strategic market niches both through local production and from the strategic international brands such as Bridgestone, Firestone, Hankook and Dunlop. Such segments include the fast growing 4x4 tyres and the construction equipment tyres.
The company has also started a programme aimed at improving the overall supply chain performance. This includes implementing best practices in the management of raw material and finished goods inventory to optimize the supply of goods and the cash flow. Planning and Logistics functions have been strengthened to ensure efficiencies and optimal costs in the supply chain.
The Nairobi tyre factory is also under going de-bottlenecking and upgrades to improve efficiencies and productivity. Energy saving programmes and projects to make the production volumes more responsive to the market demand are being implemented.
Looking further into the future, Sameer Africa is also expanding its real estate business through the Ksh. 2 Billion Sameer business Park now under construction next to the tyre factory. The new business park is expected to generate additional rental income after the first two projects, Sameer Industrial Park and Sameer EPZ Ltd, now both fully let and hosting companies that employ over 3,000 people, proved successful. The new business park, a partnership between Sameer Africa and a sister company, will consist of ultra modern offices, showrooms and coffee lounges. Sameer Africa has a 25 percent interest in this project expected to be ready in 18 months.
Sameer Africa remains firmly focused on their vision of being the leading tyre solution provider in Africa by 2015 and this vision is supported by the company’s mission of providing superior tyre solutions through innovative products, services and processes, said Mr. Karanja in conclusion.
The event was also attended by Sameer Africa Chairman Mr. Naushad Merali.
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