The Metcash Ltd (ASX: MTS) share price is pushing higher on Monday morning.
At the time of writing, the wholesale distributor's shares are up over 2% to $3.22.
This follows the release of the ASX 200 stock's half year results.
ASX 200 higher on results day
- Group revenue up 6.3% to $9.6 billion
- Group underlying EBIT down 0.2% to $246.1 million
- Underlying profit after tax down 5.5% to $134.6 million
- Interim dividend down to 8.5 cents per share
What happened during the half?
For the six months ended 31 October, Metcash reported a 6.3% increase in revenue to $9.6 billion and an 8.1% increase to $8.5 billion excluding charge-through. Management advised that this reflects growth in the Food, Liquor and Hardware pillars, partly buoyed by acquisitions.
Things weren't as positive for its earnings, with the ASX 200 stock posting a 5.5% decline in underlying profit after tax over the prior corresponding period to $134.6 million.
This was despite Metcash reporting a strong performance from its Food business during the six months.
It notes that food earnings increased 17.9% to $119.9 million, reflecting growth in Supermarkets and Campbells & Convenience and the addition of Superior Foods. It believes that the quality and competitiveness of the independents' offer continues to resonate with shoppers in a highly value-conscious environment.
This offset a small decline in Liquor segment earnings to $49.1 million and a sizeable 15.1% decline in Hardware earnings to $93.9 million. Management advised that the latter reflects weaker trade activity, increased cost pressures, and intense price competition in the professional tools market in the first quarter.
Nevertheless, both IHG and Total Tools have maintained their market share and taken strong actions in response to the current conditions.
In light of this profit decline, the Metcash board cut its interim dividend by 22.7% to 8.5 cents per share fully franked.
Commenting on the result, the ASX 200 stock's CEO Doug Jones said:
Our diversified portfolio strategy continues to deliver in the face of a challenging external environment. Conditions were difficult for all our pillars, but particularly in Hardware where the decline in Trade activity accelerated in the second quarter.
Outlook
Management provided an update on its performance in the second half, which appears to have pleased investors.
It revealed that total group sales are up 8% for the first four weeks of the second half. A key driver of this has been its Food sales, which are up 22.6% growth over the prior corresponding period.
Jones concludes:
Looking forward, as the leading wholesaler and service provider to independent businesses across Australia, our more diversified Group provides an ideal base for future growth.
Our Food and Liquor pillars are well positioned for structural growth, while in Hardware we remain confident that the long-term market fundamentals remain positive for both IHG and Total Tools. These businesses are ideally positioned to capitalise on an improvement in activity levels.
