Tyre firm Sameer Africa has announced that it took a Sh877 million hit following the closure of its factory last year, a re-organisation cost which together with lower sales pulled its full-year earnings deeper into the red.
Sameer closed its factory lastAugust citing a difficult business environment which included an influx of cheap Chinese and Indian tyres, rising production costs and an unfavorable tax regime.
The NSE-listed firm spent Sh293 million on staff redundancy costs, Sh179 million on fixed assets impairment and Sh405 million on impairment of raw material and factory spares.
This one-off expense coupled with a 16.7 per cent dip in revenues to Sh2.9 billion saw the company post a net loss of Sh652.1 million for the year to December, a deterioration from the previous year’s Sh15.7 million net loss.
“Tight liquidity restricted sales in all our markets and saw sales through our dealer channel fall 31 per cent,” Sameer said in a statement announcing its full-year results.
“Our export sales contracted 68 per cent following hard currency shortages in some key markets and political uncertainty in others. The (reorganisation) cost is a one-off and is not expected to recur in future,” Sameer, which plans to venture into real estate as a diversification strategy, funded the factory closure by dipping into its cash reserves and taking up fresh debt.
Short-term borrowings increased by Sh282.2 million to close at Sh825.6 million. The company’s retained earnings more than halved to close the year at Sh598 million with total equity, as a consequence, contracting by 26.4 per cent to Sh1.8 billion.
“Cash and cash equivalents thus decreased by Sh654 million during the year compared to an increase of Sh206 million in 2015,” said Sameer, adding that its board did not recommend payment of a dividend to its shareholders.
Going forward, the firm plans to rollout new offshore manufactured tyres, expand its regional retail footprint, lease out it former factory premises and develop its real estate portfolio.