Grocery and liquor wholesaler Metcash (MTS), owner of the supermarket brand IGA, posted a 30% rise in first half net profit and said it was on track to deliver its full-year revenue and earnings outlook.
Net profit after tax climbed to $86.2 million for the six months ended October 31, from $66.1 million a year earlier.
Earnings before interest tax and amortisation (ebita) rose 11.5 per cent to $153.7 million.
Metcash said it expects full-year sales growth of 6 to 7% and an increase in earnings before interest, tax, depreciation and amortisation (ebitda) of 10 per cent.
Earnings per share have risen to 11.3 cents, up by 28.4%.
"This is an excellent result in a period of significant market upheaval, including two months of heavy price discounting" said CEO of Metcash, Andrew Reitzer
Reduced costs at the IGA grocery distribution unit are allowing Metcash to lower prices and lessen the blow of increased discounting by other large grocers such as Coles and Woolies.
Metcash said it is also facing an increase in inflationary pressures due to drought, but is expecting that to be offset by a strong local dollar and price discounting in the first half of the 2008 financial year.
"We expect a strong Australian dollar impact to cycle out and strong underlying inflation in input commodities to flow through more fully in the second half of fiscal 2008 and ongoing," said Mr Reitzer.
IGA, the company's powerhouse, increased earnings by 11% to $129.4 million on demand from existing supermarket customers and the opening of 25 new outlets.
Metcash said a further 129 new stores are "on the books" for development.
The company's convenience distribution division, Campbell's Wholesale, returned sales growth of 14.2 per cent, but EBITA was flat at $14.6 million due to heavy price discounting by the chains and abnormally high stock losses.
Australian Liquor Marketers, the company's liquor supply unit, had a 6.2 percent rise in earnings to A$13.3 million. .
"The group has maintained its position as the clear third force in the grocery and liquor market and the strength of each of its business divisions has allowed us to withstand strong competitive pressures and market disruption," said Mr Reitzer.
"The group is well placed and anticipates a continued strong performance in the second half of the year."
Metcash rose by one cent today to close at $4.36.
