Stock Watch: Sameer Africa Limited

By / Published March 26, 2015 | 3:19 pm





Sameer Africa Limited announced their unaudited results for the period ended 31st December 2014 on 25th March 2015.

Recommendation; Hold ,( Recommended based on the company’s outlook) 

6% decline in sales to KES 3.77 Million.

Sameer Africa limited reported a 6% decline in sales resulting from lower sales in export markets by 23% and a contraction in dealer trades by 19%. Stiff competition in the local market from imported tyres as well as civil and political unrest in its key export markets also culminated to a sales decline. Gross profit margins declined by 2% to a margin of 25%. Cash generation from operating activities improved with less cash payments and expenses for the year.

Dismal performance with a pre-tax Loss of KES 69 Million, 10% rise in operating expenses and loss per share of KES 0.24.

The 10% increase in operating expenses is attributed to the set up of new retail centres. This rise as well as declined sales resulted to the huge pre-tax loss of KES 69 Million compared to the previous year’s profit (FY 2013) of KES 457 Million. Management however stated that 2013’s profits were boosted by sale of land worth KES 256 Million. Return on equity of the stock declined to a negative return of 2.64% compared to a positive return of 14.97% in the FY 2013 leading to a loss per share of KES 0.24.

Outlook: Management is cautiously optimistic that the results will improve for the year end 2015 with the company refocusing on its export market, unlocking the value of the property portfolio as well as expanding its product offering through its new brand SUMMIT. In addition, cost reduction mechanisms are been looked into together with lobbying with the government to offer further support to local manufactures. The decline of costs of raw materials to 6.5% is expected to further depress in the following months which could improve the firm’s position.

 







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