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Companies

Sameer writes off Sh403m investment in subsidiaries

Sameer Business Park
Sameer Business Park on Mombasa Road in Nairobi. Sameer has faced increased competition from established and new tyre brands besides counterfeits. FILE PHOTO | NMG 

Tyre distributor Sameer Africa #ticker:FIRE has written off Sh403.6 million of its investment in its regional subsidiaries, indicating that it expects to lose the capital.

The subsidiaries in Uganda, Tanzania and Burundi, like the Kenyan parent company, have lost market share and have been making losses for years.

"During the year Sameer Africa Plc impaired its investment in the regional subsidiaries by Sh155.1 million in Sameer Africa (Tanzania) Limited, by Sh221.9 million in Sameer Africa (Burundi) Limited and by Sh26.6 million in Sameer Africa (Uganda)," the company says in its latest annual report.

The decision contributed to the value of Sameer's investment in subsidiaries dropping to Sh130 million in the year ended December compared to Sh533.6 million a year earlier.

Kenya now holds about 97 percent of Sameer's tangible assets. The capital impairment, marked as an expense, also contributed to Sameer's loss in the review period besides a sharp reduction in shareholder funds.

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The Nairobi Securities Exchange-listed firm reported a net loss of 529.3 million in the review period, reversing a net profit of Sh13 million recorded the year before.

Total equity or shareholder funds dropped to Sh1.1 billion from Sh1.8 billion.

The tyre distributor, which shuttered it's tyre manufacturing plant and switched to imports from Asian markets, currently has a market capitalisation of Sh848 million on the NSE.

Sameer says cut-throat competition continues to assail its regional subsidiaries.

"At the same time, the regional business in Tanzania, Uganda and Burundi has been adversely affected by counterfeit products that easily outprice our quality brands in these markets," company chairman Erastus Mwongera wrote to shareholders in the report.

"This has necessitated a significant write down of the investments we hold in those markets."

Sales in Uganda fell to Sh120.3 million in the review period compared to Sh211.2 million the year before. In Tanzania, the turnover shrunk to Sh230.4 million from Sh394.4 million. Sales in Burundi declined to Sh66 million from Sh95.1 million.

Sameer has faced increased competition from established and new tyre brands besides counterfeits.

The company opted to appoint contract manufacturers in Asia to produce its brands as it sought to counter the cheaper prices of imported tyres.

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