Grocery wholesaler Metcash has lifted first-half profit by 24 per cent to $92.9 million, despite a drop in sales across its supermarkets business, with WA sales hit by increased competition and soft economic conditions.
Grocery wholesaler Metcash has lifted first-half profit by 24 per cent to $92.9, million despite a drop in sales across its supermarkets business, with sales in Western Australia hit by increased competition and soft economic conditions.
The IGA and Foodlands supplier on Monday said food sales dropped 1.4 per cent from the prior corresponding period to $4.36 billion due to fierce competition from Woolworths and Coles, plus the aggressive expansion of Aldi in South Australia and WA.
But net profit for the six months to October 31 still rose from $74.9 million a year earlier on a 7.6 per cent rise in total sales, driven by Metcash's liquor business and Home Timber & Hardware chain.
Sales revenue rose to $7.1 billion largely due to a full contribution from the Home Timber & Hardware chain it acquired from Woolworths in October 2016.
HTH only contributed one month of sales in the prior corresponding period.
At 1110 AEDT, Metcash shares were up 19 cents, or 6.91 per cent, to $2.94.
Revenue from hardware, which includes the Mitre 10 chain, nearly doubled to $1.06 billion from $581.6 million.
Liquor sales, which includes Cellarbrations, The Bottle-O and IGA Liquor networks, rose 5.1 per cent to $1.64 billion.
But food sales dropped, with Aldi's rollout in WA and SA - combined with challenging economic conditions in the west - contributing to a 1.1 per cent fall in IGA's key like-for-like sales.
Chief executive Ian Morrice, who will step down after five years in the role on Tuesday, said both liquor and hardware had performed strongly.
"We are now half way through our three-year Working Smarter program, and the initiative is delivering significant benefits, particularly in our supermarkets business," Mr Morrice said in a statement to the ASX.
"The savings achieved have been a key factor in supermarkets maintaining its earnings, despite the significant headwinds that include a continuing high level of deflation."
HARDWARE & LIQUOR UNDERPIN METCASH PROFIT:
* Net profit up 24 pct to $92.9m
* Revenue up 7.6 pct to $7.1b
* Fully franked interim dividend of 6.0 cents. No dividend in pcp
