Metcash (ASX: MTS) Falls 9% Despite Steady $142M Profit and Flat Dividend

Metcash (ASX: MTS) shares fell about 9% today after releasing its first-half results during an unusual ASX trading outage. The company reported a profit after tax of $142.2 million for the six months to 31 October, almost flat compared to last year. Group EBITDA rose 2% to $367.2 million, and the interim dividend stayed the same at 8.5 cents per share, fully franked.
This result shows what many investors already think: Metcash is a steady income stock, not a growth play. CEO Doug Jones called it “solid results in tough trading conditions,” which sums it up well. The business is performing reliably, but big gains look unlikely.

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Food Division Shines, But Tobacco Weighs on Headlines

The standout performer was Metcash’s food division, which supplies IGA supermarkets and foodservice customers across Australia. Excluding tobacco, food sales jumped 7.2% to $4.5 billion, with Food EBITDA climbing an impressive 9.8%. This suggests management’s strategy is working, particularly in the Superior Foods business serving hotels, pubs and cafés.
However, the ongoing collapse in tobacco sales continues to drag on headline numbers. Including tobacco, total food sales actually fell 0.8%. We believe investors should look past this noise. Metcash is actively transitioning away from tobacco, and the underlying growth is genuine.
The liquor segment delivered mixed results. Sales rose 1.4% to $2.6 billion on market share gains, but EBITDA fell 4.8% due to one-off strategy costs and higher labour expenses. In our view, this margin pressure should ease in the coming periods as those costs wash through.
Hardware and tools sales grew 2.5% to $1.9 billion, though EBITDA remained flat. Management noted “early signs of improvement” in the trade market, with Queensland, Western Australia and South Australia showing strength. New South Wales and Victoria remain challenged, but the trend appears to be turning.

Why Income Investors Should Pay Attention

For yield-focused portfolios, Metcash offers several attractive characteristics:

• Dividend yield around 5%, fully franked, translating to grossed-up yields above 7% for eligible investors
• Defensive business model supplying essential goods through independent retailers
• P/E multiple around 14.5x, reasonable for consumer staples
• Strong cash generation supporting a payout ratio slightly above the 70% target

Investors shouldn’t expect big share price gains from Metcash. Underlying profit after tax dropped 5.9% to $126.7 million this half, while revenue barely grew at 0.1%. The company operates in a mature market, competing against giants like Woolworths and Coles, which makes it hard to deliver strong growth.

The Investor’s Takeaway for Metcash

Metcash is exactly what it looks like: a steady, defensive income stock best suited to conservative portfolios. Management says its independent retailer networks remain “healthy and confident”, and sales momentum has carried into the second half of the year.
At current prices, the stock appears fairly valued. For income-focused investors, Metcash offers a reliable 5% fully franked yield with defensive qualities. But for those chasing growth, the story is less appealing. The company operates in mature markets where upside is limited.
Looking ahead, investors should keep an eye on the next trading update. If hardware sales pick up in NSW and Victoria, there could be a modest surprise to the upside. Still, Metcash remains a hold-for-income play rather than a growth opportunity.