Metcash downbeat on grocery outlook

Michael Roddan
AUGUST 27, 2015
The Australian
Struggling supermarkets supplier Metcash says growth in its non-food and groceries divisions and strategic initiatives are not expected to offset headwinds facing the sector, as the wholesaler continues to reel from fierce competition.
Metcash, which supplies the IGA supermarket network, today told shareholders at its annual general meeting that difficult trading conditions in the food and grocery market were expected to continue over the coming year.
The company is facing fierce competition on the price of products from bread to pasta as discounters such as Aldi and larger rivals Woolworths and Coles pursue a bigger share of the grocery market.
Metcash said it was adapting to address tougher market conditions, accelerating key initiatives and reducing the cost base.
On a more positive note, the firm said its non-food pillars performed strongly in the 2015 financial year and were expected to grow again during the current period.
However, this improved performance, along with the strategic initiatives would not offset the headwinds in the food and grocery division during fiscal 2016.
“The board and management have taken a number of steps to ensure a strong financial base to support the transformation plan,” outgoing chairman Peter Barnes said.
Former Lion chief executive Rob Murray takes over as chairman from today.
Metcash shares dove earlier this year when the company suspended dividend payments. The stock suffered its biggest one-day decline since 1998 after announcing it would not pay a final dividend for the 2015 year and suspended payments for fiscal 2016 in bid to firm up its balance sheet.
The wholesaler has been struggling to adjust to the difficult trading environment over recent months. Metcash reached an agreement to sell its automotive business to Burson Group for $275 million, after deciding against spinning off the division in an initial public offering.
Metcash logged a net loss of $384.2m for the year ended April 30 compared with a year-earlier profit of $169.2m.