Close to 600 Jobs Slashed as Sameer Africa Shuts Down Nairobi Factory

Close to 600 people are set to lose their jobs after Sameer Africa announced it will cease manufacture of tyres and allied products at its factory in Nairobi plant and shift the production offshore, possibly to India or China.

The company in a statement to the Nairobi Stock Exchange issues a profit warning that their earnings for the current financial year expected to be lower by more than 25 percent of earnings reported same period in 2015.

“At a meeting held on Monday 29^th August 2016 the board of directors resolved to cease the manufacture of tyres and allied products as the Sammer Africa factory in Nairobi to commence off-shore production by tyre manufactures domiciled in China and India;

The earnings for the current financial year are therefore expected to be lower by more than 25 percent for the earnings reported for the same period last year.”

The loss will be as a result of the company incurring a one off charge in repsect of plant and inventory impairment and employee severance cost estimated at approximately Ksh 725 million.

The company cited ‘a systematic reduction in its market share on account of cheap and subsidized tyre imports entering its market’.

Read: Sameer Africa Planning to Exit Kenyan Market

“As a result, the high market segment where the company’s locally manufactured Yana tyres compete has declined from a high of 62 percent in 2010 to only 25 percent today.”

They also attribute to the 2005 reduction in customs duties under the EAC Common External Tarriff, the high cost of electricity and underutilization of factory capacity to have impacted its business.

“Regrettably, cessation of factory operations will result in a number of employees being declared redundant,” the company noted in a statement to the Nairobi Securities Exchange.

“These are employees whose engagement has been directly related to the manufacture of tyres and tubes.” However, some workers will be redeployed to other continuing operations and distribution.

The company remains optimistic that its new strategic direction will put it on a path to growth and future prosperity by investing in research and development to offer the market tyres that are purpose built for African roads.

The move comes in light of the iron ore price dive which has seen the commodity lose 25 per cent of its value since the start of the year to trade at 10-year lows.

The firm has been making losses for the last two years, reporting Sh15 million net loss last year compared to Sh66 million loss in 2014. Its best performance in the last five years was in 2013 when it announced Sh401 million net profit.