Metcash hamstrung by grocery unit

NOVEMBER 30, 2015
The Australian
Embattled grocery wholesaler Metcash has reported a 20 per cent jump in its first half after-tax profit, but underlying earnings fell as its food and grocery division struggled.
It the six months to October 31, Metcash’s reported profit after tax rose 20 per cent to $122 million on a 1.4 per cent lift in sales to $6.6 billion.
But underlying earnings before interest and tax slid 12.7 per cent to $133.7m and underlying profit after tax slumped 6.1 per cent to $86.9m.
The ASX-listed firm has been battling intense competition in the grocery sector as Aldi and Coles gather momentum against Woolworths and Metcash-backed independents.
The firm has endured a rough year as it slashed goodwill and intangible assets $640m in June, while putting dividends on hold.
Metcash boss Ian Morrice said the firm’s turnaround in the grocery sector was progressing as planned, though the division still lagged against improvements in its liquor and hardware units.
“While we are still experiencing highly competitive trading conditions and price deflation, we are seeing evidence the transformation plan is producing positive results across the group,” he said.
“Importantly, we have seen a continuing improvement in the sales trend for the food and grocery pillar.”
The firm gave a cautious outlook and reiterated its plan to suspend dividends through fiscal 2016.
Highly competitive trading conditions continued in all its markets, particularly food and grocery, and benefits from strategic initiatives together with positive results from ALM and hardware, would not offset food and grocery headwinds this financial year, the firm said in a statement.