Metcash has laid bare the impact of the crime-riven illegal tobacco market by revealing an unprecedented 25% plunge in sales of tobacco in the first half of the 2026 financial year (H1 FY26).
But the company has not given up on its largest product category, disclosing it recently won a tobacco supply contract from BP worth about $60 million in annual sales.
The wholesale distributor said tobacco sales fell to A$637.8m (US$417.2 million) in the first half of the 2026 financial year (H1 FY26) from $983.4 million in 1H25 as it posted a flat group profit for H1 FY26.
“The rate of decline in tobacco sales accelerated following the introduction on 1 July 2025 of new regulations impacting the legal tobacco market,” Metcash said.
The business had continued to manage the decline well and was assisting the independent IGA supermarkets it supplies to transition away from tobacco sales.
Metcash announced a 0.3% lift in reported profit to $142.2 million and a 5.9% drop in underlying profit to $126.7 million on revenue, which increased just 0.1% to $8.5 billion, or 0.4% to $9.6 billion if including charge-through payments from retailers, in H1.
Revenue excluding charge-through sales would have grown 4.5% without the fall in tobacco sales.
Earnings before interest, tax, depreciation and amortisation (EBITDA) rose 2.0% to $367.2 million, but after one-off integration and strategy costs of $8.3 million, EBIT decreased 2.4% to $240.2 million.
Directors declared an unchanged fully franked interim dividend of 8.5 cents per share to be paid on 28 January 2026 to shareholders registered on 15 December 2025.
Metcash said its food business again grew earnings despite the significant and unprecedented decline in the sales of tobacco.
Earlier this year, the company urged governments and law enforcement agencies to crack down on organised crime.
At the time of writing, shares in Metcash (ASX: MTS) were trading 34 cents (9.05%) lower at $3.36, giving it a market capitalisation of $3.70 billion.
