A Sameer Africa employee puts final touches on a tyre at the Nairobi plant. File
Tyre manufacturer Sameer Africa has issued a profit warning for the year ending December, predicting that its net earnings will decline by more than a quarter from last year. The dip in comparable earnings is mainly attributable to the company’s one-off gain last year of Sh255.3 million that was booked from the sale of land.
Sameer posted a net profit of Sh401.1 million in 2013, with the earnings alert and a weaker performance in the first six months signalling that the firm will make a net profit of less than Sh300 million by year-end.
“The group’s projected earnings for the year ending December 2014 are… expected to be more than 25 per cent lower than the reported earnings for the previous year,” the firm said in a statement.
“The main factor expected to affect financial performance in 2014 compared to last year is a Sh255 million profit on sale of leasehold land recorded in 2013, which is not expected to recur in 2014.”
Its share price has gained 51 per cent in the past one year to trade at Sh7.8 per unit. Last year the firm sold a two-acre land along Mombasa Road for Sh297.5 million, netting a profit of Sh255.3 million. This helped boost its performance in the period whose operating profit before tax remained unchanged at Sh1 billion.
The company’s net profit in the half year ended June dropped 73.2 per cent to Sh80.9 million compared to Sh303 million in the same period last year when the impact of the land sale had been booked.
Political instability
Sameer’s sales in the period rose one per cent to Sh1.96 billion, with the firm saying its export sales to South Sudan and Malawi fell by 40 per cent due to political instability and currency shortages respectively. Its cost of goods sold (COGS) dropped 5.2 per cent to Sh1.3 billion, benefiting from cheaper prices of raw materials in the international markets.
Sameer is set to introduce cheaper Summit tyre brands this month to rev up sales in a competitive market, with the NSE-listed firm also seeking to sell half of its tyre business for Sh1 billion to a strategic partner who will provide technical expertise.
