Metcash reports ‘pleasing’ first-half results, despite challenges in grocery

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Outgoing Group CEO Ian Morrice handed the reins to Jeff Adams as Metcash announced sales revenue of $7.06 billion – an increase of 7.6 per cent.

Food EBIT increased 5.8 per cent to $89.4 million, reflecting positive earnings from the convenience business, compared with an operating loss of $4.3m in the corresponding period before, which included asset write-downs. Supermarkets’ earnings were broadly flat compared with the corresponding period before, with benefits from the Working Smarter program offsetting the decline in wholesale sales (excluding tobacco).

“We are now halfway through our three-year Working Smarter program, and the initiative is delivering significant benefits, particularly in our supermarkets’ business,” outgoing Mr Morrice said. “The savings achieved have been a key factor in supermarkets maintaining their earnings, despite the significant headwinds that include a continuing high level of deflation.”

Food sales declined 1.4 per cent to $4.36 billion. Supermarkets’ sales declined 0.8 per cent with the adverse impact of continuing intense competition on sales (excluding tobacco) being largely offset by an increase in tobacco sales.

Supermarkets’ wholesale sales (excluding tobacco) declined 3.7 per cent in 1H18, although there was a significant improvement in second-quarter sales compared with the first quarter. Metcash cited a continued high level of grocery deflation in the period (2.7 per cent), with significant competitor investment in price and promotions as key challenges.

Convenience sales decreased 4.6 per cent to $723.6 million, reflecting reduced sales of tobacco and drinks through petrol forecourts following revisions to key contracts in 2017.

Hardware and liquor divisions also performed well, with liquor sales increasing 5.1 per cent to $1.64 billion, reflecting continued growth in the IBA-bannered network.

Mr Adams, who was announced as Mr Morrice’s successor in June and steps into the role this month, said he is pleased with the company’s first-half performance.

“The company has a good portfolio of businesses, a very strong and capable management team, and the strength of its financial position provides significant strategic flexibility for the future,” he said.

“The ongoing success of our independent retailers will be a key focus for me. They play a vital role in local communities, and in the health of our economy.

“I am excited by the opportunity to build on the good work overseen by Ian in transforming Metcash, and in supporting our independent retailers.”

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