German wholesaler Metro said on Thursday it expects eastern Europe and Asia to drive a rise in sales in the 2018/19 financial year, although it sees profits falling due to its challenging Russian business and investments in digitalisation.
Metro's shares, which have fallen by a quarter in the last year, were down 4.4% in early Frankfurt trading.
The company said it expects sales to rise 1-3% in 2018/19, while earnings before interest, taxation, depreciation and amortisation (EBITDA), excluding contributions from real estate transactions, could fall by around 2-6%.
Metro has been restructuring its Russian business since poor performance at the unit forced it to issue a profit warning in April, hitting its shares. It has also announced plans to sell its struggling Real hypermarket chain.
Real Progress
Metro booked Real as a discontinued business as of Sept. 30 - the end of its 2017/18 financial year - and impaired goodwill of €64 million attributed to Real.
Chief Executive Olaf Koch said the sale process was progressing well. He said last month that a nationwide strike by Real workers should not derail the sale.
Metro said it expects to see a "measurable trend improvement" in sales in Russia in 2018/19, but still forecasts a "mid- to high-single digit %age" decrease in EBITDA in the business.
"Overall, 2017/18 was a successful one for Metro," said Olaf Koch, chairman of the group's management board. "We have made significant progress in many areas but also had to overcome a number of unexpected challenges. We have come very far in our transformation to focus fully on the wholesale business, which showed positive like-for-like growth for the fifth year in a row."
In terms of the turnaround of the Russian business, Koch said that Metro was "able to prove in the second half of the year that we can tackle and solve challenges. Likewise, we have put in place the best conditions to allow Real to have a successful, independent future on its own. This sale process is making good progress.
"Next year we are going to be very active once again. Our priorities are the continuing focus on our key target groups HoReCa and Trader, as well as the expansion of our digital business."
EBITDA Expectations
For the rest of the group, Metro expects EBITDA to stay around the same as 2017/18, when the figure came in at €1.4 billion.
Once a sprawling retail conglomerate, Metro has been restructuring in recent years to focus on its core cash-and-carry business, selling its Kaufhof department stores and then splitting from consumer electronics group Ceconomy .
Analysts have speculated that the revamp could go further since Czech investor Daniel Kretinsky took a stake.
News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.
