Sameer Africa has shut down its tyre distribution business, a move that will see it sack 73 employees at the end of this month.
The Nairobi Securities Exchange-listed firm had recently retrenched 52 workers, with the upcoming downsizing set to raise the total jobs lost to 125.
Sameer says the tyre business has continued to suffer despite various measures including the 2016 decision to close the Nairobi factory and outsource production to Asia.
“We wish to inform you that despite the implementation of several changes in our business operations and strategy, the business has not improved, and survival of the company is and remains a major challenge,” Sameer’s chief executive Peter Gitonga wrote to Nairobi County Labour Office on April 24, 2020.
“Arising from the foregoing, the board of directors of the company, at a meeting held on April 20, 2020, resolved to close down the tyre business. It is therefore contemplated that approximately 73 employees drawn from both management and unionisable cadres will have their employment contracts terminated on account of redundancy.”
The company, which has long lamented intense competition from cheaper tyre imports, did not say what made it throw in the towel.
Sameer, however, is among the victims of the measures the government has taken to curb the spread of the coronavirus. A nation-wide dusk-to-dawn curfew and a ban on travel into and out of Nairobi, Mombasa, Kilifi and Kwale counties have hurt the transport sector that the company targets with its Yana and Summit brand of tyres.
The tyre business accounts for about 90 percent of the company’s revenue and its closure is a material development that has not been disclosed to the investing public, drawing criticism from a section of shareholders.
The tyre division’s sales stood at Sh2.1 billion while the rental business brought in Sh240 million in the year ended December 2018, according to the latest available segmented disclosures.
Sameer also sells used motor vehicles and other assets that were used in the tyre business, according to documents reviewed by the Business Daily.
“They have closed the tyre business and are selling assets without involving shareholders,” said Patrick Njogu, the second-largest shareholder in the company with a two percent stake.
Mr Njogu said Sameer, in which billionaire businessman Naushad Merali holds a controlling 72.15 percent equity, should inform shareholders of its strategic direction.
Sameer chairman Erastus Mwongera and non-executive director Akif Butt declined to comment on the matter.
While Sameer’s tyre business has been shuttered, investors see a lot of value in its land holdings that it acquired cheaply decades ago.
“The protection is in the land which Sameer can sell or develop,” said city lawyer Andrew Musangi who has a one percent stake in the company.
Source: Business Daily