Metcash lifts first half profit

Independent grocery and convenience wholesaler, Metcash, has released its results for the six months ended October 31 2015, with first half profit up 20 per cent to $122 million, compared to $101.7 million the previous year.

Despite the profit rise, which was helped by gains in its liquor and hardware divisions, the increase was offset by a decline in food and grocery which continues to struggle amid intensive competition and price wars.

Food and grocery sales rose 0.7 per cent  to $4.54 billion, compared to $4.51 billion in the previous year. Total sales for its convenience channel increased 3.7 per cent to $774 million, compared to $746.4 million for the same period last year. Metcash said CSD continued to grow, however, this was partly offset by a decline in Campbells.

The trend in underlying supermarket sales, excluding tobacco, has improved from negative 3.7 per cent to negative 0.4 per cent in the current reporting period. IGA stores like for like retail sales increased 0.6 per cent.

Food and grocery EBIT declined 22.9 per cent to $91.9 million reflecting price investment in supermarkets and a softer EBIT performance in convenience due to the sales decline in Campbells reseller business and lower margins from major customer contracts in CSD.

Ian Morrice, Group CEO, said the company was continuing to invest in its turnaround plan and was starting to see positive gains from the transformation.

“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. Importantly, we have seen a continuing improvement in the sales trend for the food and grocery pillar,” Morrice said.

The results announcement comes as Metcash, which operates the IGA, Foodland, and Foodworks banners, launches the next phase of the its transformation plan, “Working Smarter”. Morrice added the group would continue to look for further growth opportunities and invest in new channels, including Alibaba’s online Tmall platform in China.

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