The Metcash Limited (ASX: MTS) share price is in focus today after the wholesale distributor and hardware ASX share announced its FY22 result.
Metcash supplies a number of different independent retailers such as IGA, Foodland, Cellarbrations, The Bottle-O, IGA Liquor, Duncans and Thirsty Camel. It also owns Mitre 10, Total Tools and Home Timber & Hardware.
FY22 result highlights
Here are some of the main highlights from the company’s 2022 financial year:
- Group revenue up 5.9% to $15.2 billion
- Underlying EBIT (EBIT explained) up 17.7% to $472.3 million
- Underlying net profit after tax (NPAT) grew by 18.6% to $299.6 million
- Statutory NPAT increased by 2.7% to $245.4 million
- Total FY22 dividend up 23% to 21.5 cents
- Underlying earnings per share (EPS) went up 23.5% to 30.5 cents thanks to the effects of the share buyback
- Operating cashflow of $432.3 million
The key driver of the result was hardware, which saw EBIT increase by 40.7%, reflecting earnings growth across its businesses, thanks to elevated residential construction activity and the increased profit contributions.
The food pillar saw EBIT rise 4.1% and liquor EBIT went up by 9.8%, reflecting “continued robust demand” in the retail network and a recovery for on-premise sales after the easing of COVID trading restrictions.
New distribution centre
The company announced a new 115,000m distribution centre which will replace its existing 90,000m distribution centre at Laverton for Victoria. This will help the competitiveness of independent retailers, it will create greater efficiencies and provide access to a wider range of products.
Outlook
Metcash revealed that strong sales momentum has continued into FY23 in the first seven weeks, with total sales rising 8.6%. Food sales were up 5%, hardware sales were up 19.8% and liquor sales went up 8.6%.
The company said that there continues to be a solid pipeline of residential construction and renovation activity, which should help hardware profit in the first half of FY23.
However, the company noted that there is uncertainty with how elevated inflation will impact consumer behaviour.
My thoughts on the Metcash share price
It’s promising to see how much progress the business has made over the last couple of years, and the strength continues. Profit is unlikely to grow every year once there is a construction slowdown, but I’m impressed by what it’s achieving at the moment.
For me, it’s one of the more defensive ASX dividend shares. Considering its earnings multiple valuation is quite a bit lower than Wesfarmers Ltd (ASX: WES), a somewhat comparable business, I think Metcash is worthwhile having in a blue-chip focused portfolio.
