Metcash has returned to profit and plans to reinstate dividends as the company’s transformation strategy starts to pay off.
The supermarket wholesale supplier has posted a $216.5 million annual net profit, bouncing back from a $384.2 million loss 12 months ago.
Metcash, which supplies independent supermarkets, including IGA, Foodland and Foodworks stores, has been matching the prices of Coles and Woolworths on a range of basket of goods as Aldi expands into South Australia and Western Australia.
The group, which also supplies hotels liquor and owns hardware chain Mitre 10, recorded a 1.3 per cent lift in sales to $13.54 billion in the 12 months to April 30.
Chief executive Ian Morrice says the strong result means the group plans to reintroduce dividend payments after it stopped them in the 2014/15 year.
“Key supermarkets initiatives are delivering returns and the liquor and hardware businesses continue to build momentum,” Morrice said in a statement to the ASX on Monday.
Morrice also said a focus on debt reduction and cash management was positioning Metcash to invest in transformation and growth initiatives..
“This financial strength also underpins the group’s intention to recommence half yearly dividend payments with effect from the FY17 final dividend, subject to capital requirements.”
However, he warned competition, deflation and a rising cost base will make for challenging conditions for Metcash’s food and grocery business over FY17.
This comes as discount supermarket chain Aldi expanded into Metcash’s strongest market, South Australia, earlier this year.
The company sold its automotive business for $285.4 million last year to help pay down debt and cover restructuring costs.
At 1052 AEST, shares in Metcash were flat at $2.12.
