Metcash “concerned” about FY forecast

Posted by Nicole Eckersley on 2nd December 2010

Australian grocery wholesaler Metcash has booked a rise in first-half underlying earnings, but cautioned it may not be able to hit its full-year targets.

Metcash said the continuation of the “extremely tight trading conditions” in the first half will “exert pressure” on its ability to achieve its full-year guidance.

The company said the strong Australian dollar meant it was facing falling food prices while facing higher labour and utility costs. The wholesaler also cited an “elevated promotional landscape” and more value-conscious consumers as reasons why it may not make its forecast for the full year.

“We are facing price deflation across a range of categories at the same time as there are cost pressures on the labour front and utilities. There is no doubt that consumers are also becoming more price conscious as a result of higher interest rates,” said Metcash CEO Andrew Reitzer.

“Metcash has reduced its cost of doing business as a result of incremental and sustained improvements in our distribution centres and across our supply chain.”

The company recorded a 2.1% gain in underlying EPS to A$0.15 a share in the half year ended 31 October. EBITA rose 7.7% to A$199.4m (US$191.2m). Wholesale sales rose 5.8% to A$5.94bn.

Metcash said its “strong EBITA” was posted despite “persistent tough trading conditions”, price deflation in most product categories and the fact the business was lapping the “strong trading” of last year after the Australian government’s stimulus package.

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