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Metcash downgrades earnings guidance

Nicholas Grove  |  30 Nov 2012Text size  Decrease  Increase  |  

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Nicholas Grove is a Morningstar journalist.


Metcash Limited (MTS) on Friday announced a 4 per cent year-on-year rise in underlying net profit before one-off items for the first half of fiscal 2013 to $121.3 million.

The company declared an interim dividend of 11.5 cents a share fully franked, in line with the prior corresponding period.

Metcash CEO Andrew Reitzer said the core business remains strong and acquisitions are adding value.

"Revenue, underlying earnings and cash flows are all strong. Our net working capital position has improved and our strategy of diversifying the business is beginning to show results," he said.

However, Reizter also cut the company's full-year earnings guidance, with Metcash now expecting a fall in earnings per share (EPS) of 2 per cent to 6 per cent, instead of a previously expected fall of 1 per cent to 3 per cent.

He attributed the downgrade to several factors, including a higher-than-anticipated number of Franklins stores that had to be closed, as well as ongoing deflation.

Morningstar senior analyst of consumer, tech and telecom, Tim Montague-Jones, said while he had to take another look at his numbers, he was expecting full-year EPS to fall around 7 per cent.

"My concern with Metcash, and I guess everyone's concern with Metcash, is how much market share they're losing to the Woolworths (WOW) and Coles price war that is going on," he said.

Metcash's reported net profit for the first half of fiscal 2013 stood at $82 million, the grocery wholesaler said in a statement, down 13.1 per cent on the prior corresponding period.

Reported revenue for the half rose 3.5 per cent on the same period in the previous year to $6.34 billion, the company said.

Wholesale sales rose 3.5 per cent year over year to $6.28 billion, it said, while earnings before interest, tax and amortisation rose 1.2 per cent to $206.2 million.

Operating cash flow for the half stood at $144.7 million, Metcash said.

Underlying EPS for the half stood at 14.5 cents a share while reported EPS, which takes into account significant items and the closure of some Franklins stores, stood at 9.8 cents a share.