While the grocery and liquor wholesaler, Metcash, reported a 12.4% rise in its 2010 net profit, it found the going hard in the closing months of the year to April 30, and expects more of the same for the rest of this year.
The company said yesterday it expected low sales growth in the food and liquor sectors to continue to December this year.
Metcash said wholesale sales grew 4.9% in the year to April to $11.51 billion (from $10.97 billion).
"This was despite persistent low inflation in core grocery categories and the receding effects of the government stimulus package, which boosted sales in 2009," the company said.
The outlook comments means the company is looking at sales growth slower than the 4.9% figure in coming months because it is projecting slower growth earnings.
Metcash said it was looking at 6%-8% growth in underlying earnings per share (EPS) for fiscal 2011, (based on 32 cents EPS in the year to April).
"While current trading conditions remain subdued, we are confident of further growth in our earnings per share in the 2011 financial year, subject to economic conditions remaining stable," chief executive, Mr Andrew Reitzer, said in a statement.
Metcash’s comments on trading and sales growth echo similar statements from other retailers in food and groceries.
Rival Woolies has sliced its 2010 sales growth estimate in half and Coles reported a slowing in momentum as well.
Metcash said net profit for the year to April 30 was $227.6 million, up from $202.5 million in the previous corresponding period.
Metcash declared a 30% franked final dividend of 15c per share, (up from 14c previously) taking the total dividend for the year to 26c (24c).
"Directors have previously stated the intention to return earnings to shareholders, while retaining adequate funds within the business to invest in future growth opportunities," the company said on its dividend policy.
"The Board has determined that the company’s dividend pay out ratio should be at least 75 per cent of Earnings Per Share (EPS). In 2010 the total dividend of 26 cents represents 87 per cent of reported EPS or 81 per cent of underlying (which excludes intangible amortisation and non-recurring items) earnings per share."
Metcash’s grocery distribution business, which supplies independent supermarkets including IGA and Foodworks, saw a 4.1% rise in sales in the year compared to the previous corresponding period.
Earnings before interest, tax and appreciation (EBITA) rose by 9.8% on the previous corresponding period to $346.5 million.
The Australian Liquor Marketers business had flat sales, but a focus on cost cuts boosted EBIT rise by 6.9% to $36.1 million.
Campbells Wholesale suffered from the decline in local convenience stores, with sales up just 1.5% to $1.68 billion, but EBITA down 12.5% to $28.8 million.
Sales in the Campbells Cash & Carry business were down as the business was restructured, which saw the closure of eight branches in recent months.
Metcash said it had completed a strategic and operational review of its wholesaler to the Mitre 10 hardware store brand, of which it bought 50.1% stake during the year.
"The future direction of Mitre 10 is expected to focus on improvements in the supply chain, developing a strong merchandise and marketing model and growth strategies," the company said.
The 2011 financial year will have a full 12 moth contribution from Mitre 10.
Metcash shares rose 9c to $3.94 on yesterday’s down market.
