Utilities blackouts hike Choppies operation costs
Choppies Limited, the Botswana Stock Exchange (BSE) and Johannesburg Stock Exchange (JSE) listed retailer has admitted that the electricity and water cuts have had a great impact on the rise in its cost of operations, though such impact has not been numerically measured.
The dent on operating margins was said to be a result of the increase in administered prices while rolling blackouts and water cuts have repeatedly disrupted business operations. Choppies says is has been forced to design production plans in line with the disruption schedules. However the company's operating profit increased by 11 percent between June 2014 and June 2015, which reflects the buoyancy of its operating activities. Meanwhile the BSE quoted retailer last week announced its retail expansion plans into sub-Saharan Africa, with more stores due to be opened in Zambia soon.
Choppies aims to branch a total of 200 stores by the year 2016, with 35 new stores due to be launched next year. The retailer was due to launch new operations in Zambia and Tanzania by mid 2015, but plans were delayed by a few months. According to the retail giant's June 2015 financial statements, Choppies said its planned expansion into Kenya will help spread risk and drive group-level sales volume growth.
However, the company hopes to capitalize on its expanding brand range and cost containment initiatives to mitigate the losses.
"We are confident that our expanding brand range and cost containment initiatives and improved logistical efficiencies will support margins across the region in the event of a weakening in the consumer environment," read the statement.
Choppies is ranked Botswana's biggest retailer with 73 stores in operation. The company has also made forays into South Africa, opening 37 new stores. Having been operating only in Harare, Choppies stretched its operations to the northern part of Zimbabwe by increasing its stores in the country to 20. The retail giant acquired a 75 percent stake in 10 Ukwala Supermarkets in Kenya in May 2015, in line with its strategy of expanding into new markets in sub-Saharan Africa. The transaction immediately gave Choppies an increased footprint and growth platform in Kenya. Three of the supermarkets are located in Nairobi, two in Nakuru and five in the port city of Kisumu, the third largest city in Kenya. It is expected that the Competition Authority in Kenya will grant approval for the transaction by October 2015. During the financial year to June 2015, the group's revenue increased by 20 percent to P5.9 billion. Gross profit increased by 20 percent to P1.3 billion from P1.1 billion in the previous year.
When presenting the results in a teleconference, Choppies Group Chief Executive Officer, Ramachandran Ottapathu said profit after tax increased 11 percent to P197 million while earnings per share increased by 20 percent to 17.11 thebe.
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