Big fall in tobacco sales burns wholesaler’s profits
Independent retail supplier Metcash reported a small increase in interim profit following a decline in tobacco sales.
The wholesale distributor of IGA, Miter 10, Total Tools, Bottle-O, Cellarbrations and other independent brands made a net profit of $142.2 million in the half year to October 31, up 0.3 per cent on the previous year.
The group’s underlying earnings (before interest, tax, depreciation and amortization) rose two percent to $367.2 million, while sales revenue rose 0.1 percent to $8.48 billion.
“Our business has achieved solid results in challenging trading conditions, supported by disciplined operational performance and the successful execution of our strategy,” said Group CEO Doug Jones.
Food sales rose 7.2 per cent to $4.5 billion and Metcash said this was supported by differentiated and localized offers from independent retailers.
Following the new tobacco laws that came into effect on July 1, tobacco sales continued to decline, falling 35.1 percent to $637.8 million.
The rules require cigarettes to have warning labels such as “poison in every breath” and ban flavorings such as menthol or mint.
Metcash said it was managing the decline and helping its independent retail network diversify away from tobacco sales.
Metcash’s liquor business increased sales by 1.4 percent to $2.6 billion; This reflects market share gains in packaged spirits in Australia and an increase in wholesale sales to on-premise customers.
However, it was stated that the overall liquor market remains challenging.
Sales in Metcash’s hardware and tools division rose 2.5 per cent to $1.9 billion, driven by strong demand for building materials and timber in Queensland, Western Australia and South Australia.
Metcash will pay shareholders an interim dividend of 8.5 cents per share.
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