The country’s third force in groceries and liquor wholesaling, Metcash, has reaffirmed full year profit guidance of 7%-10% growth in earnings after meeting market expectations for its 2009-10 interim profit.
Normalised profit after tax rose 12.3% from $97.2 million to $109.2 million for the six months to October 31.
Revenue was $5.569 billion, up 6.5%, and normalised net profit also was $109.2 million, up 12.3%.
Metcash chief executive Andrew Reitzer said in a statement that the company continued to show strong growth in sales and earnings, led by its major division, IGA Distribution, which supplies IGA supermarkets.
"The trading environment is strong, however low price inflation continues to hamper trading opportunities across all of our business pillars," Mr Reitzer said in the statement to the ASX.
"As economic conditions continue to improve, we reiterate our guidance of seven to 10 per cent growth in pre-abnormal earnings per share for the year to April 30, 2010," he said.
Metcash said first half wholesale sales rose 6.6% on a headline basis to $5.6 billion, while EBIT (earnings before interest and tax) was up 6.9% at $189.9 million.
“IGA Distribution continues to be the powerhouse of the Metcash business and is performing well against the competition from the two chains.
"We have fulfilled our plans to create a national distribution network for our new Fresh business and are delighted that this operation’s revenue is on track to exceed $1 billion this financial year”, CEO, Andrew Reitzer said in yesterday’s statement.
"Wholesale sales of IGAD rose 9.3% to $3.48 billion, with Earnings Before Interest Tax and Amortisation growing 11.5% to $163.3 million.
"Sales were strong throughout the six months despite lower price inflation. Comparable store sales grew by 6.4%," the company said..
Metcash declared an interim dividend of 11 cents fully franked, up from 10 cents fully franked in the prior corresponding period.
The CEO was also confident the company’s bid for Mitre 10, the hardware chain, would be good for Metcash if it succeeded.
Metcash has made an offer for 50.1% of Mitre 109, with the rest to be purchased in coming years. A private equity group has made a rival offer as well.
Metcash said the number of new branded stores rose by 31 during the half year, with 63 openings forecast for the full year, well above earlier forecasts.
Six of the 45 former Coles supermarkets now under the Foodworks banner have begun purchasing from IGA Distribution, the company said.
"The number of outlets will progressively rise to 45 over the rest of the 2010 financial year," it said.
Metcash’s private label business continues to grow, with Black & Gold sales rising 7%.
Australian Liquor Marketers sales grew 1.2% to $1.28 billion, with Earnings Before Interest, Tax and Amortisation (EBITA) rising to $14.6 million.
Sales to Independent Brands Australia (IBA) banner retailing groups rose 7.4%, with 9.9% sales growth by the Cellarbrations brand, 16.2% by IGA Plus Liquor and 5.4% by Bottle-O.
"The division continues to focus on improving store standards with 41 store refurbishments," Metcash said.
Campbells Wholesale experienced sales growth of 4.6% to $843.2 million, but the division’s EBITA fell from $15.8 million to $13.5 million.
Metcash shares fell 1.9% or 9 cents to $4.59.
