Tyre distributor Sameer Africa plans to use the Sh879 million it expects from the sale of 3.75 acres to repay loans whose financing cost has risen significantly.
The Nairobi Securities Exchange-listed firm had earlier said it is selling the land without indicating the use of the proceeds.
The company, in remarks accompanying its results for the half year ended June, now says the money will be used to settle debt.
“Further, proceeds from the sale of a portion of undeveloped leasehold land that we expect to conclude in the year will allow the group to retire a significant portion of the debt, providing savings in finance costs and reducing exposure to foreign exchange losses,” Sameer said.
The company’s total liabilities rose to Sh857.4 million at the end of June from Sh782.5 million at the end of December 2022.
This includes two loans — a Sh345.4 million credit facility from majority shareholder Sameer Investments Limited and Sh100 million from Sameer Telkom Limited — both maturing in 2025.
The rise in debt saw its net finance costs more than double to Sh69.2 million in the six months to June compared to Sh31.6 million a year earlier, contributing to a reduction in net income.
Sameer’s net profit in the review period dropped 65.4 percent to Sh24.2 million as sales shrank to Sh201.1 million from Sh313.5 million.
The company also incurred a higher-than-normal tax bill of Sh37 million, representing 60.4 percent of its pre-tax profit of Sh61.3 million.
The corporate income tax is set at 30 percent but may vary due to matters specific to a company and the accounting period.
Sameer’s effective tax rate was also high in the prior year at 40.4 percent. The company made aggressive cuts in its cost of sales, raising its gross profit margins in the review period.
The cost of sales dropped to Sh26.6 million from Sh109.8 million, lifting the gross profit margin to 86.7 percent from 64.9 percent.
This will be the first major sale of land by Sameer in recent years, with the company sitting on major gains in the investment properties that were acquired decades ago.
Sameer does not state the size of its freehold land but sources had estimated that the company has 85 acres in Nairobi’s Embakasi area.
The tyre distributor joins other NSE-listed firms including Centum Investment Company Plc that have prioritised debt reduction in a rising interest rates environment.
