Sameer half year profit falls 56pc on high costs – Business Daily
Sameer Business Park in Nairobi. FILE PHOTO | NMG
Tyre distributor Sameer Africa has reported a 56.2 percent drop in net profit for the six months to June attributed to increased operating costs.
It posted a net profit of Sh67.6 million in the period compared to Sh154.5 million a year earlier.
The decline is tied to a jump in costs by more than two times to Sh109.8 million from Sh42.1 million.
Sameer has reported global supply shortages that have disrupted the tyre business and a weakening of the shilling that increased the cost of imports.
The company’s revenue as a result dropped by three percent to Sh313.5 million from Sh323.1 million.
“We expect recovery in the second half of the year as global supply chain stabilises and our property business makes available for letting space that was previously under restoration,” the company stated.
The Russia-Ukraine conflict has led to severe disruptions to global markets on the supply of raw materials for industrial production as a result of export restrictions and concentration of production in a few countries.
High logistic costs have also worsened from 2020 in the wake of the Covid-19 pandemic.
“The profitability trend for the first half is projected to replicate for the remainder of the year. However, the group expects there will be an impact on our performance as a result of the upcoming general elections and deterioration of the shilling against the US dollar,” it added.
The local shilling has depreciated 8.4 percent against the dollar in one year to trade at 119.4 units to the American currency.
This means that importers have to pay more for raw materials, intermediate and finished goods. Sameer imports tyres from Asia where it has appointed contract manufacturers after it closed its Nairobi plant.
Sameer said it is set to implement the second phase of its new strategic plan, focusing on both the tyre and property businesses.
The company, which owns Sameer Industrial Park and Sameer Export Processing Zone, had previously announced it would primarily focus on property development before reviving the tyre distribution business.
The Nairobi Securities Exchange-listed firm has lost market share in the tyre business to rivals including Chinese brands which are popular with price-sensitive motorists and commercial transport operators.
The company outsourced its tyre production to Asia to gain more price competitiveness.