By Rose Welimo/Statement
Sameer Africa Limited, the only tyre manufacturer in Kenya, will shut down its manufacturing facility in Nairobi from 30 September 2016.
Most employees of the company will be rendered jobless as the company winds up is operations.
The Company will cease the manufacture of Yana brand tyres and allied products at the Sameer Africa factory in Nairobi and commence offshore production by manufacturers domiciled in China and India.
According to the Managing Director, Mr. Allan Walmsley, the company’s board of directors unanimously made the decision after receiving the necessary approval from the Capital Markets Authority.
“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 Kshs. 725 million. 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.
Walmsley said that the move was necessitated by competition from cheap and subsidized tyre imports entering its markets.
Since 2006, Sameer Africa Limited has seen a systematic reduction in its market share on account of cheap and subsidized 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 only 25 per cent today.
The 2005 reduction in customs duties under the EAC Common External Tariff (CET), the high cost of electricity and underutilization of factory capacity have also impacted the business adversely.
However, there will be no impact on customers, end-users and the supply of the Yana brand to the East African market. Yana Tyres will continue to be engineered under the supervision of the company’s own chemists and engineers.
“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,” said Mr. Walmsley.
Sameer Africa will also continue to invest in research and development to offer the market tyres that are purpose-built for African roads and will continue with the roll-outs of its Yana Tyre Centre offering across East Africa.