Metcash on Monday announced that earnings before interest and tax was up 17.7 per cent to $472 million for the 12 months ended April 30. Net profit after tax was up 2.7 per cent to $245.4 million when one-offs were included. The company lifted its final dividend to 11¢ per share, to be paid on August 10. Total dividends for the 12 months were up 23 per cent on a year ago. Metcash shares climbed by 5 per cent to $4.35 in early trading on Monday on the ASX.
Food inflation is on the rise across the industry.
The two big rivals have been reporting a jump in inflation, with Woolworths revealing in May inflation of 2.7 per cent for the March quarter, while Coles said inflation was running at 3.3 per cent for the same period. Mr Jones said in the second half of the Metcash financial year, inflation was up 1.9 per cent. He said inflation was at its highest in the group in the month of April, when it was 5.3 per cent on a measure used by the group for when products left the distribution warehouse and before discounts were applied. That had fallen to 4.5 per cent in May.
He said IGA prices for shoppers in stores were highly competitive. “We have a very healthy price match program,” he said.
About 60 per cent of the supplier base had asked for price increases in the second half, and some were returning for a second bout. “We are seeing suppliers that are coming back for a second increase,” Mr Jones said.
The group also announced that a new large distribution centre of 115,000 square metres would be built in partnership with Goodman Group at Truganina in outer Melbourne to service the Victorian market. Metcash will pay $70 million for fit-out and set-up costs in a long-term lease, with the new distribution centre up and running by mid-2024.
As well as supplying the IGA supermarkets and other independent players such as Foodworks, Metcash also operates the Independent Hardware Group, which owns the Mitre 10 and Home Timber & Hardware brands and also has an 85 per cent stake in the Total Tools chain.
Earnings in the hardware operations were up 41 per cent to $191 million for the 12 months ended April 30. Mr Jones said Total Tools now had 100 outlets and was in a strong position to withstand the fierce competition in the power tools market from rivals such as Bunnings, which is rolling out a new brand called Tool Kit Depot, built upon the framework of the Adelaide Tools business it acquired in 2020.
Former chief executive Jeff Adams surprised investors in October by stepping down to make way for Mr Jones, who was chief executive and senior vice-president of South African-based Massmart Wholesale. Mr Jones paid tribute to Mr Adams on Monday for putting in place the cornerstones of the success which Metcash is having.
MST Marquee analyst Craig Woolford said it was a strong result from Metcash, which showed that the IGA network was holding onto the gains in market share made early in the pandemic.
“The strength of the result was across all divisions with improving second-half sales trends and a stronger margin result in food,” he said.
