Grocery wholesaler Metcash’s liquor business and Home Timber & Hardware chain have underpinned its 24 per cent lift in half-year profit.
While its supermakets’ business, as the supplier of IGA and Foodlands stores, continued to come under pressure amid Woolworths and Coles’ price cuts and the aggressive expansion of Aldi into South Australia and Western Australia.
Net profit grew to $92.9 million during the six months to October 31, up from $74.9 million a year earlier.
Food sales for the half dropped 1.4 per cent to $4.36 billion compared to the same period a year ago.
The group said food sales continued to improve across the eastern seaboard but remained weaker in SA and WA due to Aldi’s aggressive rollout in those states and WA’s challenging economic conditions.
The IGA retail network recorded a 1.1 per cent fall in the key like-for-like sales.
“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,” said outgoing Metcash CEO Ian Morrice.
Sales revenue rose 7.6 per cent to $7.1 billion, up from $6.6 billion in the prior year largely due to a full half-year contribution from Home Timber & Hardware (HTH) that it acquired from Woolworths in October, 2016.
The first half of the 2017 financial year had included only one month of sales from HTH.
Morrice said both liquor and hardware had performed strongly, including a turnaround in HTH in a relatively short period.
“We are now halfway through our three-year Working Smarter program, and the initiative is delivering significant benefits, particularly in our supermarkets business,” Morrice said in a statement to the ASX on Monday.
“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, which includes the group’s Mitre 10 chain, contributed $1.06 billion in revenue for the half, up from $581.6 million a year ago.
The group’s liquor sales, which includes Cellarbrations, The Bottle-O and IGA Liquor networks, rose 5.1 per cent to $1.64 billion.
Incoming Metcash CEO Jeff Adams said he was pleased with the company’s first-half performance.
“The company has a good portfolio of businesses, a very strong and capable management team, and the strength of its financial position provides significant strategic flexibility for the future.”
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