International analysis: Metro scrapes back into the black

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Germany’s Metro Group has returned to the black, albeit at a very low level, with net profit of R17m (£14.6m) for the first half to June 30, compared with a net loss of R98m (£84.6m) during the same period last year.

Metro has managed a slight improvement in sales despite setbacks

The group posted a 2.3% drop in net sales to R30.8bn (£26.6bn) for the six-month period.

Metro’s performance was helped by the sale of its Real hypermarket subsidiary in central and eastern Europe, which was bought by French retail group Auchan in November 2012.

However, the group incurred costs from the administration of its former DIY subsidiary Praktiker and from investing in lower pricing at its Media Saturn electronics division. It was also impacted by strikes at Real hypermarkets in Germany.

Metro’s cash-and-carry division suffered a sales decline of 2.9% in the first half and 3% in the second quarter as it faced economic challenges, most notably in southern Europe.

The group plans to continue rolling out its small-sized cash-and-carry format internationally and is investing in emerging markets such as Russia, China and Turkey. In Russia it has increased its planned investment to R750m (£648.2m) over the next five years, shared between the Metro and Media Saturn businesses.

Sharp increases in Metro’s online and private-label sales during the period were encouraging.

Media Saturn reported a 0.9% sales rise during the first half and a 0.3% decline in the second quarter, impacted by legal wranglings, a weak European market and the continued transition online of electronics.

Now that the Media Saturn advisory committee is legally established, Metro is keen to push through strategic realignment of the division. However, this may well take time and quick fixes are unlikely.

In Germany, the Real hypermarket division is to renew investment in a turnaround after sales fell by 6.2% in the first half and by 11.2% in the second quarter, in part because of Easter falling earlier. Real now plans to invest a much-needed R500m (£432m) in the division over three years.

“The disposable income and purchasing power of our customers in nearly all European countries were still burdened by austerity measures,” said Metro Group chief executive Olaf Koch.

“Nevertheless, we continued to significantly strengthen our balance sheet.”