Page 1 of 1

Nicholas Grove is a Morningstar journalist.

Metcash (MTS) on Wednesday said net profit before one-off items rose 1.4 per cent year on year to $116.6 million for the first half of fiscal 2012.

The result was achieved on a 2.2 per cent rise in sales to $6.07 billion, the grocery wholesaler said.

Earnings before interest, tax and amortisation (EBITA) rose 2.2 per cent from the same half in the prior year to $203.7 million.

In a statement, Metcash said the growth in EBITA was posted despite persistent tough trading conditions, price deflation in most product categories and sustained marketing campaigns being run by the major self-supply chains.

"We continue to face price deflation across a range of categories. There is no doubt that consumers are remaining price conscious in such an uncertain economic climate, Metcash chief executive Andrew Reitzer said.

Underlying earnings per share (EPS) before one-off items rose 1.3 per cent to 15.2 cents a share, the company said.

Metcash declared an interim dividend of 11.5 cents a share fully franked, representing a payout ratio of 91 per cent of reported EPS from continuing operations.

By division, Metcash said IGA Distribution increased sales by 1.7 per cent to $3.69 billion.

Australian Liquor Marketers reported a 1.2 per cent rise in sales, while
Campbells Wholesale saw sales rise 3.8 per cent.

The Mitre 10 hardware business posted a 6.5 per cent rise in sales, the company said.

Metcash also said it expected low to mid-single-digit growth in underlying EPS for the full year.

Commenting on the result, City Index chief market analyst Peter Esho said Metcash, which competes with the retail giants Coles and Woolworths (WOW), needs to work very hard to ensure its network of independent retailers is competitive.

"The sluggish growth in IGA Distribution will be more of an issue, with investors trying to gauge how the concept will perform as the war between Coles and Woolworths heats up over the next few years," Esho said in a note.

"Growth is not guaranteed for IGA, which means Metcash will need to work very hard in making sure its network of independent retailers is competitive. This will require investment."