Grocery wholesaler’s profit drops 63% after diversification

Posted by AFN Staff Writers on 3rd July 2012

Restructuring costs have led to a 63% drop in full-year profit for grocery wholesaler and retailer Metcash.

However, Metcash’s sales reportedly rose in the year to April 30, 2012, and underlying profit grew by 2.5% to $262.5 million. However, restructure costs and the Franklins acquisition totalled $176.7 million, resulting in a full-year net profit of $90 million, down from $241.4 million in the previous year.

Metcash also announced in a media release that it would raise up to $375 million by issuing new shares to bankroll growth opportunities. The group, which supplies groceries to IGA supermarkets, plans to use funds to buy out hardware store Mitre 10 and fund other non-grocery acquisitions.

Metcash’s expansion includes the $53.8 million acquisition of a 75% stake in Autobarn owner, the Automotive Brands Group, and it is investing $80 million in introducing new automated packing technology in Metcash’s distribution centres in 2014.

Australia’s independent retailers that Metcash supplies, such as IGA, have also been hit by the ‘price war’ between supermarket giants Coles and Woolworths, causing concern about the future performance of Metcash’s wholesale supermarkets division.