Metcash group profits turnaround in latest results but supermarket profits down
Grocery wholesaler, Metcash, has turned its profits around announcing a AUD$216.5 million profit after tax for the 12 months ended 30 April 2016.
This is a vast turnaround on its AUD $384.2 million loss it reported for the prior 12 month period.
Reporting to the Australian Securities Exchange (ASX), Metcash stated that its group sales revenue had increased 1.3 per cent on the previous corresponding period to AUD $13.5 billion.
Metcash’s Chief Executive Officer, Ian Morrice, said the group had completed the second year of its Transformation Plan and had made significant progress.
“Key Supermarkets initiatives are delivering returns and the Liquor and Hardware businesses continue to build momentum,” he said.
“The Group is focused on supporting Independent Retailers to ensure they are well positioned to deliver the ‘Best Store in Town’ for their customers.”
Morrice said the group had a strong focus on capital and cash management which helped to significantly reduce its debt so the company can focus on its transformation plan and growth opportunities.
“This financial strength also underpins the Group’s intention to recommence half yearly dividend payments with effect from the FY17 final dividend, subject to capital requirements,” he said.
Metcash’s debt was reduced from AUD $392.3 million to AUD $275.5 million due partly to the sale of its automotive division.
Food and grocery: IGA, FoodLand and Friendly Grocer
Total sales for Metcash’s food and grocery division was AUD 9.3 billion, a 0.5 per cent increase on the prior 12 months.
Its earnings before interest and tax (EBIT) declined by 17 per cent to AUD $179.9 million however. Supermarket EBIT droped by AUD $21 million.
Metcash’s convenience sales increase by 0.4 per cent to AUD $1.6 billion but its EBIT declined by AUD $16 million. Metcash said this reflected a challenging business environment impacted by an accelerated decline in Campbells reseller business, particularly in tobacco and margin pressure from major C-store distribution contracts that was not offset by growth in Food Services.
Liquor: Cellarbrations, IGA Liquor, The Bottle-O
EBIT for liquor increased by 7.8 per cent on the prior 12 months, totally AUD $62.1 million. Metcash said the results reflected conversion of its stores to the IBA bannered network and a strong focus on cost control.
Hardware: Mitre 10, True Value Hardware
Hardware EBIT was up 9 per cent on the previous corresponding 12 months reaching to AUD $32.8 million.
Metcash said the result was driven by improved performance of its joint venture stores, supply chain efficiencies and tight cost control.
Transformation and Working Smarter Programs update
Metcash said within its food and grocery division its “price match” scheme has now been rolled out to 960 stores and it has reached its targeted 150’ diamond stores’ (a store make over scheme which includes addressing fresh produce and price issues).
Within the past 12 months Metcash started its Work Smarter program which aims to make it simpler for customers and suppliers to work with Metcash.
Metcash flagged a highly competitive trading environment will continue.
“Highly competitive trading conditions continue in all our markets, with the additional impact from increased Food and Grocery competition in both South Australia and Western Australia markets.”
The grocery wholesaler said it will continue to face “headwinds” from competition, deflation and a rising cost base.
“The Group will continue to progress the Transformation Plan (including Working Smarter) in FY17. We expect further consolidation and positive momentum in the Liquor and hardware Pillars,” Metcash said.