Choppy mining waters stymie Choppies

Choppies CEO Ramachandran Ottapathu.

Photographer: Calvin Anderson

But the discount retailer said it was reasonably confident its performance would soon turn around, after the acquisition of 21 stores owned by Durban-based Jwayelani, which were expected to unlock significant synergies. Choppies is in a race against time to reach its target of 200 stores by year-end, and on Tuesday reported a loss before tax of 23.7-million pula (R32.4m) at its South African operations in the six months to December.

The loss came as financially strained consumers in towns such as Rustenburg and Carletonville, where a number of mining companies have closed shafts, increased purchases of basic staples, that earn lower margins such as rice, flour, sugar and mielie meal.

"With our expansion plan, we should have been breaking even in SA by this financial period. But we couldn’t achieve it," said Choppies CEO Ram Ottapathu.

The last three months of 2015 had been particularly challenging, with the sharp weakening of the rand causing costs to rise.

Despite the weakening economic environment in SA, Ottapathu was hopeful about the group’s prospects. "The acquisition of the Jwayelani stores will unlock significant synergies and improve the performance in SA," he said.

Choppies has yet to make a profit in SA since entering the country in 2008.

The group’s 78 stores in Botswana recorded a profit before tax of 129.7-million pula.

Profit growth was also achieved from its 28 stores in Zimbabwe, despite macroeconomic pressures, and a deflationary trend, due to the usage of hard currency.

Headline earnings per share fell to 6.84 thebe in the first half from 8.37 thebe, due to the increase in the number of shares issued over the period.