Choppies profit down 34%
Pauline Dikuelo | Wednesday March 8, 2023 11:03
In its half year results for the six months ended 31 December 2022, the Botswana Stock Exchange-listed retailer said profits dropped by 34% to P83 million from P114 million that was recorded in corresponding period last year.
Directors attributed the loss to the demanding economic environment characterised by stubbornly high inflation, higher interest rates and unemployment, all of which the group said continue to constrain consumer spending and their ability to digest higher prices.
In a statement accompanying the results, group CEO Ramachandran Ottapathu said their sales volumes were lower in many categories, exacerbated by competitor discounting, with cost pressures only partly recovered through price increases. “While we have strong and resilient brands, affordability is a growing constraint for consumers, limiting their ability to digest higher prices. We are being thoughtful and balanced about inventory levels by category and expenditure as we work through the second half and position ourselves for next year,” he said.
Despite the tough trading conditions, Ottapathu said they are expecting improvement in margins as the economies in which they operate in recover and their new stores reach potential.
Sales from Botswana saw an increase of 2.2 percent as the business continued to show strong resilience in an increasingly challenging economic environment as the local economy continues to experience elevated inflation, high unemployment, and low economic growth.
During the reporting period, Botswana experienced modest sales growth from P2, 231 million to P2, 280 million due to negative volume growth. “With a value proposition that resonates with customers and with the cost of everyday items still stubbornly high in too many categories, more customers are choosing Choppies for the value and assortment we are known form,” he added.
The group’s operating expenditure rose by 12.9% driven mainly by five new stores and higher inflation resulting in a 13.2% reduction in adjusted EBITDA and 18.3% reduction in operating profit (EBIT).
Meanwhile, the CEO said the group continues to manage its cash resources and liquidity prudently with a reduction of P64 million in net debt over the past six months from P600 million to P536 million.
Capital expenditure increased to P122 million from P83 million as the group invested in new stores and maintained the distribution fleet. Management made deliberate investments in inventory to support service levels, combat supply chain disruptions and service new stores. The group’s sales from the rest of Africa rose by 24% to P1,231 million from P992 million recorded last year driven by the addition of eight new stores, inflationary increases in Zimbabwe and Zambia and volume growth in Namibia and Zambia.
Choppies currently operates in Botswana , Namibia , Zambia and Zimbabwe. Adjusted EBITDA, which excludes foreign exchange gains and losses on lease liabilities, movements in credit loss allowances and Zimbabwean legacy debt receipts, increased by 5.7 percent. EBITDA was reduced by 18.3% due to foreign exchange losses on lease liabilities of P9 million against a gain of P29 million last year, offset by foreign exchange gains on Zimbabwean legacy debt receipts of P19 million.
The segment EBIT declined by 32.0% due to foreign exchange losses on lease liabilities and higher depreciation on the back of the new stores.