Sameer Africa is seeking to raise Sh879 million from the sale of 3.75 acres of land amid liquidity challenges stemming from the struggling tyre business.
The transaction is expected to produce a large gain for the company which has been carrying the land at the historical cost of just Sh15 million rather than the present market value.
“Assets held for sale relates to 3.75 acres of undeveloped leasehold land … the sale was initiated in 2022 and likely to conclude by the third quarter of 2023,” the Nairobi Securities Exchange-listed firm says in its latest annual report.
“The fair value of the asset held for sale is estimated at Sh879,036,000,” Sameer added.
The firm had in 2021 said it was mulling the sale of a property to facilitate stabilisation of the liquidity position of the company.
This is the first major sale of land by Sameer in recent years, with the company sitting on major gains in the investment properties that were acquired decades ago.
Sameer does not state the size of its freehold land but sources had estimated that the company has 85 acres in Nairobi’s Embakasi area.
The fair value of the total land and commercial properties owned by Sameer closed last year at Sh7.58 billion compared with Sh8.07 billion in the previous year, dwarfing the market value of the Nairobi Securities Exchange-listed firm.
The land and commercial properties value is 12.5 times the company’s market capitalisation of Sh604 million as of the start of trading on Monday when its share price opened at Sh2.17.
The firm, which is involved in tyre selling and real estate business has two loans —Sh395.99 million loan from majority shareholder Sameer Investments Limited and Sh100 million from Sameer Telkom Limited— maturing in 2025.
Sameer Africa's net profit for the financial year ended December 2022 dropped by 54 percent to Sh100 million as the firm faced tyre supply disruptions and increased import costs.
The property segment returned a profit of Sh186 million from the previous year’s Sh159 million, meaning that the tyre business was loss-making to pull down the group’s net profit to Sh100 million.
The firm, which had earlier on issued a profit warning, stated that the weakening of the shilling against the dollar had adversely impacted its margins since it did not pass the full effect of price changes to customers.
In 2016, the company closed its Nairobi factory to cut costs and turned to India and China for production. This did not however work out, forcing it to drop the business line in 2020 before resuming a year later.
The company recently said it will once again review the viability of its tyre trading business in the wake of supply disruptions and high import costs.