Kenya's tyre manufacturer embarks on recovery strategy

by Daniel Ooko

NAIROBI, July 30 (Chinese media) -- Kenya's tyre manufacturer, Sameer Africa, said Wednesday it has adopted a recovery strategy in the second half of the year as a result of reduced sales and profits that followed a difficult first half of the year.

The firm's Managing Director Michael Karanja said according to their half year results, the company had experienced reduced sales and profit when compared to the same period last year and has just managed to break even in the first half.

"The company has strong brands around which the recovery strategy is built," Karanja told an investor briefing in Nairobi.

Yana, a tyre designed with Africa's tough driving conditions in mind and is renowned for being durable and reliable, is Sameer Africa's leading brand while its other key brands which it distributes throughout East Africa include Bridgestone and Firestone.

Sameer Africa is also the local agent for Dunlop South Africa and Hankook.

Karanja said the company plans to expand its retail outlet by establishing five new Yana Tyre Centres (three in Kenya and two in Tanzania) in addition to the current six which are contributing nearly 10 percent of the company's revenue.

Sameer Africa had issued a profit warning in May 2008 indicating that its performance, though expected to remain positive, would be less than budgeted as a result of among other reasons.

Difficulties experience in the first quarter of the year when key regions mainly Rift Valley and Western Kenya were rendered inaccessible due to the post election violence.

Karanja said transfer of the company's products to Uganda is also disrupted resulting in Uganda not achieving its targets for the first half.

"Logistical challenges including road and rail transportation disruptions resulting in congestion at the port of Mombasa. That caused delays in clearing key material affecting continuous tyre manufacture," he said.

Karanja told the investors that as a consequence, the company has reported reduction in sales as well as profit before tax for the half year to June 2008 compared to the same period last year and that the company just managed to break even in the first half.

He decried the sharp increase in the prices of key raw material used in tyre manufacture most which are petroleum based.

Karanja said a 26 percent increase in petrol prices since January 2008 has had a huge negative impact on tyre manufacture globally.

For Sameer Africa, natural rubber prices have increased by 38 percent since June 2007 to June 2008, synthetic rubber has risen by 25 percent while carbon black has shot up by 21 percent over the same period.

Karanja outlined key elements of the recovery strategy that is under implementation which will have a positive impact in the second half and the whole year outturn.

Starting with the initiatives in Sales and Marketing, he said the company will put increased efforts in protecting their profit margins by supporting and focusing on products and brands that give them better returns.

The company, now selling tyres in more than 10 export countries in the Eastern and Central Africa region, will continue to grow the export business, which has grown rapidly over the recent years to contribute more than 30 percent of the total company revenue.

Karanja said the company also plans to introduce a number of new products to serve specific and strategic market niches both through local production and from the strategic international brands such as Bridgestone, Firestone, Hankook and Dunlop.

"Sameer Africa remains firmly focused on their vision of being the leading tyre solution provider in Africa by 2015 and this vision is supported by the company's mission of providing superior tyre solutions through innovative products, services and processes," said Karanja.