Zachary Ochuodho @zachuodho
Sameer Africa Plc decision to outsource manufacturing of its tyres has led to severe stock shortage forcing the firm to issue a profit warning.
The company says its net earnings for the financial year ending December 31, will decline by more than 25 per cent that of last year which stood at Sh13 million.
Sameer closed its local factory in 2016 at a cost of Sh877 million citing difficult business environment occasioned by influx of cheap Chinese and Indian tyres.
This was part of a strategy that would see the firm transit to offshore manufacturing of tyres, opening additional tyre centres and leasing out their factory.
The firm, which used to produce the Yana brand currently imports tyres from India and China through contract manufacturing.
“We wish to inform the shareholders of the company, potential investors and general public net earnings for the financial year ending December 31, 2018 are projected to be at least 25 per cent lower than those reported for the financial year ended 31st December 2017,” said Edgar Imbamba, the Company Secretary in a statement.
According to the statement, the turnover of the firm for the nine months for the period ending September 30 had declined 11 per cent below the same period in 2017.
The board said the decline for the period was occasioned by severe stock shortages due to production challenges faced by some of their offshore manufacturing partners. He said, following the contract manufacturing division, the company has not fully realised the favourable margins intended and has taken appropriate remedial measures.
Imbamba said the warning was based on the unaudited results of the company and the group’s performance up to September 30, 2018.