Kenya tyre maker Sameer Africa doubled its losses last year, with the management blaming its exit from the tyre production for the poor performance.
The Nairobi Stock Exchange-listed company is now operating on a negative working capital of Ksh134 million ($1.34 million), and incurred a net loss of Ksh1.06 billion ($10.6 million) last year compared with a net loss of Ksh529.32 million ($5.29 million) in 2018.
Total revenues declined 15 per cent to Ksh1.75 billion ($17.5 million) from Ksh2.06 billion ($20.6 million) in the same period while total assets fell to Ksh1.53 billion ($15.3 million) from Ksh2.58 billion ($25.8 million).
"The loss for the year significantly increased following a decision to exit from the tyre business leading to the impairment of the tyre business assets and accrual of staff redundancy costs," the company said in a statement. The company has announced its exit from the tyre manufacturing business citing difficult operating conditions for a turnaround, with total revenues for this year forecast to fall by a further Ksh1.49 billion ($14.9 million).
The company closed its tyre manufacturing plant in Kenya in August 2016, opting to contract manufacturers in China and India. "Despite introducing new product lines, increasing the retail footprint and reducing costs, the company has not been successful in returning the business to the desired profitability levels."
The board approved its exit from the tyre business in order to ring-fence the key profit units, reduce costs and capitalise on the rental segment of the business.
"Regrettably, this change will lead to the closure of our tyre centres and the loss of jobs for some 73 staff. The impact of this change is that the company will now trade mainly in the rental business." The company hopes that its profitability will increase with projections for 2021 forecast at Ksh185 million ($1.85 million).