Sameer Africa posted a 9.1 per cent drop in net profit for the six months ended June as the tyre manufacturer continued to lose market share to cheaper imports.
The firm said its net profit in the period stood at Sh43.5 million compared to Sh47.9 million a year earlier.
This came as revenues fell 15.8 per cent to Sh1.4 billion in what the company attributed to increased competition from subsidised tyre imports from markets like India and China.
“Revenue for the period was below same period 2015, reflecting the continued onslaught of imported subsidised tyres from the East,” Sameer said in a statement. The market share of its flagship Yana/Firestone tyre brand, for instance, has declined from a high of 57 per cent in 2000 to the current all-time low of 15 per cent.
The difficult market conditions has prompted Sameer to consider shutting its factory in Nairobi, noting that reduced sales has eliminated the economies of scale it needs to operate the plant profitably.
“As earlier reported the board continues to assess the viability of local manufacturing and the feasibility of outsourcing production to lower cost jurisdictions such as China or India,” the company said.
The move to cut local manufacturing started in 2014 when Sameer contracted a Chinese firm to produce the Summit brand of tyres which it has been importing.
The company says Asian makers are subsidised to the tune of 80 per cent of their sales, allowing them to gain market share in the regional market where cheaper tyres are in high demand.
Sameer’s bid to form a joint venture with a technical investor –to modernise its tyre factory in Nairobi— collapsed last year after the parties failed to agree on the valuation of the business.
To diversify away from its mainstay tyre manufacturing and distribution business that is in decline, the company is set to venture into the real estate market with several projects over the medium term.
Among the planned projects are a modern office block in Nairobi’s Westlands and a shopping mall and hotel on Mombasa Road.
– Business Daily