Sameer to diversify products as it eyes Africa expansion
Posted Sunday, June 17 2012 at 14:49
Sameer Africa will soon start making rubber products such as gumboots as it seeks to diversify from the competitive tyre market.
The company has faced rising production costs and increased competition in the tyre market that has muted its sales and profit over the past five years.
The company is now looking to expand its product range to include footwear, molded rubber items and hoses as it eyes a larger share of the African market including DR Congo, Malawi and Southern Africa.
Managing Director Michael M Karanja said the products will be in addition to about other five types of tyres they are looking to introduce into the market this year.
“We are diversifying to other markets, and looking at what other rubber products we can add to our product range,” added Mr Karanja at the firm’s AGM on Friday.
The tyre market has witnessed increased number of players since 2005 when the government reduced import duty from 25 per cent to 10 per cent in favour of transporters in partner states under the East African Community external tariff.
This has posed a challenge to Sameer over the period since its sales have remained statistic at Sh3.4 billion in 2007 and Sh3.6 billion last year despite the company having reviewed prices severally over the period. This is a pointer that its unit sales have dropped.
The company also hopes to capitalise on the rising cost of manufacturing in the Far East which it hopes, will increase market appetite for locally manufactured tyres.
“In 2005 the common external tariff was overhauled in one night which made it attractive for importers to set shop here. We saw over 200 people players join tyre market,” said Karanja.
The company has been diversifying its business in recent past to include real estate under Sameer business and industrial parks.
But it has been hit by inadequate tenancy, notably due to the relocation of one of its major clients.
“About 30 per cent of the park has been rented out,” said Mr Karanja.
Sameer, which manufactures the Yana brand, said its net profit stood at Sh96 million last year compared to Sh57.3 million a year — a reversal of the 63 per cent drop in 2010 when it failed to declare a dividend.
The company has yet to hit its 2009 performance when its net profit stood at Sh158 million that allowed it to a pay a dividend of 50 cents.
It will pay a dividend of Sh0.50 a share and its share at the Nairobi Securities Exchange (NSE) shed 18 per cent over the past year to Sh4.50.