Metcash could end the year ungeared
May 24, 2004
By Dirk de Vynch
Cape Town - Continued strong cashflows from Metcash Trading, the Australian-listed subsidiary of Metro Cash and Carry (Metcash), could see the wholesale and retail company wiping out its debt in the next financial year.
Shaun Bruyns, an analyst with RMB Asset Management, said unless Metcash Trading needed to raise debt to finance an acquisition, it could end the current financial year ungeared.
Metcash Trading's annual results to April showed a decline in the net debt position from A$40 million (R190 million) to A$33 million. This was despite ongoing capital expenditure and new investments. The net debt-to-equity ratio declined from 9.3 percent to 7 percent.
Metcash Trading has previously said talks were at an advanced stage regarding an acquisition for as much as A$150 million of a company outside Australia and New Zealand that could affect the company's gearing if it decided to go to the banks to finance the deal.
But Syd Vianello, an analyst with Nedcor Securities, said the company had been looking at acquisitions for some time, although not much had materialised as yet. In the light of this, he said a takeover of the company seemed doubtful.
Metcash could, of course, decide to go to the market, but Vianello said he did not believe Metcash Trading would follow this route. "They have almost no debt left, so going to the banks would be the logical option."
Metcash, which has a 61 percent stake in Metcash Trading, has also made good strides in bringing down the Australian dollar-denominated syndicated loan it holds over the Metcash Trading business.
Bruyns said strong dividends from the Australian unit should help the locally listed parent company to reduce its syndicated loan to below A$100 million. This is from A$119 million a year ago and A$150 million two years ago.
Carlos dos Santos, the chief executive of locally listed Metcash and chairman of Metcash Trading, has also denied rumours about the Australian unit's possible sale.
But Vianello said it was not up to management or the board to decide if Metcash Trading was for sale. "It is for the major shareholders, RMB and Stanlib, to decide if the company is for sale."
Talk about the sale of the Australian unit surfaced after the buyout announcement of Metcash's African assets was made.
Metcash Trading contributes roughly two-thirds to the group's earnings, and will be the parent company's only remaining holding after the buyout of the rest of the company by a management and black empowerment consortium for R1.3 billion.
Metcash Trading's net profit jumped by 25 percent to A$101.8 million in the year to April. Revenue was up by 7.1 percent to A$7.2 billion.
Metcash's share price closed 3c higher at R2.46 on Friday, while the general retailers sector of the JSE Securities Exchange closed 0.3 percent up.
|
|
