Metcash shares tumble

Food earnings, finance costs take toll on profit

SHARES in the company behind Independent Grocers of Australia and hardware chain Mitre 10 have slumped after lower food earnings and higher finance costs weighed on its full-year results.

Metcash yesterday reported revenue of $12.66 billion for the year to April – up 1.8 per cent from the previous year.

The group swung to a fullyear net profit of $192.8 million after a steep writedown took a toll on its bottom line the previous year.

But earnings before interest and tax fell 1.4 per cent to $330 million as growth in hardware and liquor failed to fully offset a slide in earnings from food.

Metcash also retails under the Home Timber & Hardware, Cellarbrations and Bottle-O brands.

The group’s underlying profit, stripping out one-off items, fell 3 per cent to $210.3 million.

Metcash, which had slipped to an impairment-driven $150 million loss the previous financial year, held its final dividend at a fully franked 7c a share but investors were unimpressed.

Its shares had slumped 9.37 per cent to $2.85 at 1200 AEST yesterday.

The IGA supplier faces increasing competition in the grocery space, with traditional heavyweights Woolworths and Coles announcing cost-cutting measures to compete with German chain Aldi, US interloper Costco and soon, Germany’s Kaufland.

Despite a 0.3 per cent increase in food sales to $8.79 billion, Metcash’s food earnings fell 3 per cent to $182.7 million following a decline in wholesale sales to IGA supermarkets and a $10 million investment in growth initiatives.

Nonetheless, Metcash chief Jeff Adams said the group had made “good progress on key initiatives”, which helped deliver “a pleasing financial and strategic outcome for the year”.

“I am encouraged by the level of retailer confidence in the future and their ongoing investment in stores to improve the quality of our independent networks,” Mr Adams (pictured) said in a statement.

“I am confident in our plans to further champion their growth and continued success of our independent networks.”

Total liquor sales increased 5.6 per cent to $3.67 billion,

Hardware sales fell 0.9 per cent to $2.10 billion amid a slowdown in construction and the closure of unprofitable company-owned stores, as well as the loss of a large Home Timber & Hardware wholesale customer in Queensland during the first half.

But hardware earnings increased $11.9 million, or 17.2 per cent, to $81.2 million.