The Metcash Ltd (ASX: MTS) share price is up 4% after the company gave a FY25 earnings update.
This diversified company supplies a number of independent liquor retailers, as well as IGAs, around the country through its food and liquor divisions. It also owns a number of hardware businesses including Total Tools, Mitre 10, Home Hardware and others.
Strong earnings update
The company is currently going through its process to finalise its report for the year ended 30 April 2025.
That process has indicated that the underlying net profit after tax (NPAT) for the year will be “slightly better” than market consensus. In other words, better than what analysts were expecting.
At the EBIT (EBIT explained) level, the business is expecting its food pillar to make EBIT of between $245 million to $249 million, the liquor pillar EBIT should be between $102 million to $105 million, the hardware pillar should see EBIT of between $186 million to $190 million and corporate (EBIT) costs should be between $33 million to $35 million.
Overall, group EBIT should be between $504 million to $508 million.
This should mean the underlying net profit will be between $273 million and $277 million for the company, which is a key focus for the business and what the business pays its dividend with.
Hardware businesses merged
Metcash said its Independent Hardware Group and Total Tools businesses will be merged to be the Total Tools and Hardware Group. The current CEO of the Independent Hardware Group, Scott Marshall, will lead the combined hardware pillar.
The company said merging the businesses aligns with its aim of having one leading and scaled hardware business serving commercial and DIY home improvement sectors. Management believe this positions Metcash with a clear operating model alongside food and liquor, enabling it to be better placed to work with independents, franchisees and corporate-owned retail stores.
This combination is expected to provide a platform for accelerated growth through “improved strategic alignment, scale benefits, the leveraging of shared customer bases and property opportunities, as well as through simplification.”
As a result of the merger, Richard Murray, current CEO of Total Tools, will be leaving Metcash to pursue other opportunities.
Final thoughts on the Metcash share price
This company could be a beneficiary of rising interest rates, leading to rising earnings and dividends, if the economy improves.
I don’t think it’s going to rocket higher, but it could deliver solid growth, so it’s one of the ASX dividend shares to watch.
