- Expresses confidence in new Zambian Leadership
- Choppies returns to profitability, as Ram’s strategy pays off
- Choppies cashflow grows
Choppies Group Chief Executive Officer, Ramachandran Ottapathu has expressed confidence in the new Zambian President, saying that he is a pro-business leader who has for a long time been advocating for ease of doing business.
Zambia’s veteran opposition leader Hakainde Hichilema was sworn in as the new Zambian President in August this year, after defeating the former, Edgar Lungu.
“We are over the moon about his Presidency. This man has for a long time been advocating for ease of doing business. Through his leadership we are sure that there will be forms and policies aimed at improving the ease of doing business in Zambia,” Ram said in an interview this week. He believes that under the new Presidency, reforms will be introduced which will see the revival of economic sectors like mining, which contributes significantly to the Zambian GDP, especially Copper mining. “This will translate into multiplier effects, and we expect the Small Micro and Medium Enterprises (SMMEs) to be propped up in the process.” To Ram, the increase in busines activities will translate into increased buying power, which will see retailers like the Choppies enterprises in Zambia recording increased sales.
Choppies operates 27 stores in Zambia. Ram says the business has been doing well in Zambia and that they will rolling out a slow and phase expansion there. “In fact we will be rolling out the slow and phased expansion in the four markets that we operate in, being Zambia, Zimbabwe, Botswana and Namibia,” Ram stated, adding that the expansion will be financed internally.
Ram’s interview with The Business Weekly & Review was motivated by the recently released Choppies financial results for the year ended 30 June 2021, which showed that the Fast Moving Consumer Goods (FMCG) giant, the Choppies Enterprises Limited Group continues to record profitability.
According to Ram, the profitability is evidence that the Choppies Turnaround Strategy is paying off.
The strategy involved restructuring all operations which saw Choppies Group exiting non-performing markets.
Following the exit from under-performing investments, growth continues to be realized at Choppies.
During the reporting period, Choppies recorded an impressive 197 percent growth in cash-flow. The cash-flow improved from P162 million to P359 million.
According to Ram, the improved cash flow means that Choppies will be able to self-finance its slow but phased expansion as well as honour its financial obligations with ease.
Further, Choppies recorded P82 million in profit.
The group‘s revenue decreased by 1.7 percent to P 5.3 billion from P 5.4 billion in 2020 mainly as a result of negative volume growth in Botswana due to the impact of the COVID-19 pandemic on the economy and consumer spend.
“The rest of Africa revenue increased by 2.2 percent to P1.18 billion from the P1.16 billion seen in 2020 driven by inflationary increases in Zimbabwe and Zambia which were further offset by negative fluctuations in currency exchange rates,’’ it announced.
Total operating costs were reduced by 7.2 percent resulting in an 8.7 percent increase in earnings before interest and taxes (EBIT) from P 208 million to P 226. 2 million. EBIT margins improved from 3.8 percent to 4.2 percent. The increase in the effective tax rate is primarily due to last year’s losses related to the exit of the South African market in 2020. Choppies says it has managed its cash resources and liquidity prudently over the course of the COVID-19 crisis with a reduction of P 55.4 million in net debt including debt disclosed in 2020 under discontinued operations.
In the operational overview, the group said despite volumes reducing by 5.8 percent, revenue from Botswana declined by 2.7 percent as the business continued to show strong resilience in an increasingly competitive operating environment and poor trading conditions. Operating limitations due to government regulations and precautionary measures taken because of the COVID-19 pandemic, resulted in a lower gross profit margin of 22.9 percent compared to last year’s 24.4 percent. The gross profit margin remains relatively healthy despite the extremely challenging trading conditions. Operating expenditure was well controlled, reducing by 8.8 percent, which helped negate some of the declines in EBIT from P 259.5 million to P 246.1 million. One store was closed during the year bringing the total number of stores in Botswana to 90 stores as compared to 91 stores in 2020.
As for the rest of Africa which consists of 6 stores in Namibia which increased by 1 from 5 in 2020, 27 in Zambia from 22 stores 2020 and 32 in Zimbabwe revenue increased by 77percent in constant currency and 2.2 percent in Botswana pula (BWP ) terms because of negative fluctuations in currency exchange rates. The rest of Africa constant currency growth was driven by hyperinflation in Zimbabwe and double-digit inflation in Zambia.
“The gross profit margin at 20.1 percent from18.2 percent in 2020 improved due to inflationary increases in pricing in Zambia and Zimbabwe. Total costs were well-managed reducing by 2.5 percent. The segment has shown a significant decline in EBIT losses to P 19.9 million from P 51.5 million in 2020 owing to improved gross profit margin and a reduction in costs.” Choppies disclosed.
The group says it expects uncertainty in its business and the Southern African economy due to the duration and intensity of the COVID-19 pandemic; the duration and extent of economic stimuli; timing and effectiveness of global and regional vaccines; and volatility in employment trends and consumer confidence all of which may impact its results.