The crunch in sales growth at supermarkets has eaten away profit growth at Metcash, the operator of IGA.
The company today posted a 20.6% fall in full year statutory net profit to $171.9 million.
However, underlying profit was up 9.3% to $194.8 million, excluding one-off costs, including restructuring and the cost of the acquisition of Home Timber & Hardware (HTH).
Group sales were up 5.4% to $14.12 billion for the 53 weeks reported.
A short time ago, Metcash shares were up more than 6% to $2.33.
The company says earnings were in line with the prior year, with cost savings and a 53rd trading week offsetting the impact of intense competition and difficult economic conditions in Western Australia.
Food sales, which increased 0.6% to $9.18 billion over the 53 weeks, were down 1.3% when adjusting to a normal 52 week year.
Supermarkets sales were up 1.3% to $7.65 billion but were 0.6% lower when excluding the 53rd week.
“This reflects an improved performance in the eastern states and weaker sales in South Australia and Western Australia,” the company says.
Hardware sales increased 52.3% to $1.61 billion, including seven months of sales from Home Timber & Hardware following its acquisition in October 2016. Mitre 10 sales increased 2.9%, or 1.4% excluding the 53rd trading week.
Metcash declared a final dividend of 4.5 cents a share fully franked.
“Pleasingly, the group delivered earnings growth supported by the HTH acquisition, and strong cash generation in a difficult external environment,” says CEO Ian Morrice.
EBIT (earnings before interest and tax) were up 7.7% to $296.7 million and net debt was reduced by $194.7 million to $80.8 million.
The results in detail: