Business Reporter.
Photo Credit: Karin Schermbrucker.
Grocery retail chain Pick n Pay says it spent nearly R60 million on diesel to keep generators running at its stores in a bid to eschew the impacts of load shedding on its operations.
In a trading update for the 43 weeks ended 25 December 2022, the group reported a boost in sales and turnover for the period, despite a “significantly more difficult trading environment”.
Group sales for the first 10 months of the 2023 financial year (FY23), covering the 43-week period from 28 February 2022 to 25 December 2022, increased 9.3%. South Africa sales growth for this 10-month period was 9.0%, with like-for-like sales growth of 4.8%.
Pick n Pay South Africa sales grew 4.5% (3.8% like-for-like) in the 43-week period, while South African internal selling price inflation for the 17-week period was restricted to 10.0%, below 12.2% CPI Food.
Pick n Pay said that load shedding has completely disrupted the retail sector, and is now being seen as the “permanent new reality” for South Africa.
“Our priority has been to provide an uninterrupted service for customers in our stores, whatever the level of load shedding. Inevitably, load shedding has disrupted customers, with some impact on turnover.
“Of greater consequence, however, are the substantial unplanned costs incurred in running localised power generation for stores.”
Pick n Pay said that the ongoing crisis in national electricity generation is having a profound impact on every part of society and the economy.
The group has ensured that all Pick n Pay and Boxer stores have backup power and are operational throughout load shedding – however, severe load shedding has created significant challenges beyond the cost of diesel.
“Customer demand is dampened as a result of the disruption, inconvenience, and concern that food may spoil due to interruptions to power at home. The production of food and other goods is disrupted, creating stock challenges,” it said.
It said that diesel generators are also not designed to run for many hours on end and suffer breakdowns, which means the businesses incur additional costs.
The group said it spent an additional R346 million year-on-year on diesel to run generators at stores in the first 10 months of the year, with the costs concentrated over the latter months.
The generators currently run at a rate of approximately R60 million per month, depending on the stage of load shedding experienced.
“In addition to the above, the group is experiencing increased generator repairs and maintenance costs and some additional food waste costs.”
Pick n Pay previously warned shareholders to expect broadly flat FY23 earnings (against the FY22 pro forma earnings base) due to external headwinds, including unprecedented load shedding. Because of the further escalation in load shedding since then, the issues have only been exacerbated, it said.
“The group is working exceptionally hard to mitigate as much as possible of the additional cost pressure.”
Pick n Pay said that despite the government’s promises that a plan for the energy crisis is being worked on, and that pressure on businesses will be eased, it is clear that progress will be slow.
“The group, therefore, takes the view that the current crisis is a permanent new reality, requiring a rapid, determined and concerted response. We are determined to be on the front foot in adapting our Ekuseni strategic plan and our operations successfully to the new reality.”