Good news for shareholders in Australia’s third force grocery group, Metcash, which yesterday confirmed that sales for the first quarter were on track with guidance, and it revealed a deal to supply at least a quarter of a billion dollars a year in products to the 45 stores and 8 liquor outlets that Foodworks is acquiring from Coles.
"It is anticipated that the first store will transition to supply from Metcash in the next month with the last transferring by the end of April 2010.
"The supply agreement will be for an initial period of 10 years and will incorporate supply of the fresh categories," Metcash said in a statement yesterday.
"At the wholesale level it is expected that the new Foodworks stores will add an additional $250 million of sales to Metcash in the first full year of operation.
"Metcash will also continue to provide its high level of service to the more than 700 Foodworks-aligned customers under the terms of its existing contracted supply arrangements which have been extended until 2019."
Then the company’s AGM was told in Sydney that first quarter sales were in line with expectations.
The grocery wholesaler and distributor told shareholders the economic environment remains challenging (it’s not alone).
In a presentation to the annual general meeting, Chairman Carlos Dos Santos said "sales for the first quarter are in line with our expectations”.
And, CEO, Andrew Reitzer said in his presentation that there were recent indications suggesting the environment may not worsen significantly.
He reiterated guidance of 7% to 10% growth in normalised earnings per share saying there was no evidence to show it may not be achieved.
"First quarter sales remains strong albeit moderating given higher comparative base at the end of FY09.
"Operating leverage dilution is still apparent as investment in Fresh business continues, will moderate in 2H.
"Management reiterates its guidance of 7-10% growth in normalised EPS for FY10. No evidence to suggest guidance cannot be achieved.
"With only first quarter results available, too early to “call” any change to guidance for full year.
"A further market update will be made at half year."
He said that the guidance was being given subject to the following key observations:
Unemployment not exceeding Government’s projected 8.5%; Comparative FY09 EPS is 29.53 cps; Excludes intangible amortisation; Exclude Non-recurring items and the interest cost for FY10 is in line with management expectations.
