Metcash Limited (MTS) is a leading marketing and distribution company operating in the food and other fast moving consumer goods categories.

MTS operates via three business units: IGA Distribution (retail), Campbells Cash & Carry (wholesale) and Australian Liquor Marketers (ALM; liquor wholesale)

Metcash announced solid FY11 results today, with profit up 6.1% to $241.4 million.

Underlying earnings rose 6.1%, but operating cash flow was disappointing, sliding 51.6%.

The company declared a 16 cent final dividend, bringing total dividends for the year to 27 cents.

Despite the mostly positive results, the company did issue a cautious outlook, saying conditions are likely to remain challenging for the rest of 2011.

The market was reasonably happy with the results as MTS shares gapped up a couple of percent this morning on the news before pulling back to close up 0.5% at $3.90.

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Elders (ELD) is one of Australia’s most historic companies, having been an advisor, supplier and agent for Australian primary producers for 170 years.

ELD incorporates the Elders rural services and financial services businesses and the forestry and automotive operations acquired and developed by Futuris Corporation.

The group was one of the shares to sell following the GFC, plummeted from a high near $30 to current levels around 50 cents.

On 23 May, ELD reported a 1H11 net loss of $14.6 million.  This compares to a $165.9 million loss a year earlier.

The result was affected mostly by debt restructuring costs, with the group actually reporting an underlying profit of $1 million.

Underlying EBIT rose 94% on-year, with the Rural Services division contributing most to the result due to an improvement in network performance.

However, Elders downgraded its full year profit forecast to $7.5 million – $24.5 million amid uncertainty about the outlook for its Automotive and Forestry divisions.

ELD tumbled over 9% on the day, making it one of the worst performers in the Australian share market.

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Graincorp (GNC) provides handling, storage, marketing, and logistics to the Australian grain growing industry.

The company is also the primary bulk handling company on the east coast of Australia, servicing a growing number of domestic and export grain buyers.

GNC saw plenty of volatility over 2006-2008 owing to severe drought conditions prominent across key crop regions in Australia.

Natural disaster events such as floods and the recent earthquakes have also threatened operations.

Things have since turned around for GNC on the back of some strategic business moves.

Last year, AWB Ltd (AWB) and GNC considered a merger of their operations but this did not materialise as AWB’s board opted for a takeover offer from Agrium valuing it at $1.24 billion.

GNC finally managed to grow its business through the acquisition of the Kirin malt house in Perth from Kirin brewery.

Towards the end of last year, Graincorp reported a 27% rise in FY10 net profit to $80.2 million with the contribution of GNC’s new malt business was a key driver of the result.

Key strategic moves

Over the past three years, GNC has made a range of strategic improvements. Graincorp has diversified earnings and geography with the acquisition of an international malt business.

The company has entered the bulk wheat export market following the removal of the single desk monopoly.

The Australian grain industry has become more international following the move with future growth likely to be underpinned by favourable Asian demand.

GNC has secured its rail haulage capacity and aligned its operating structure with an improved customer focus.

The company is looking increasingly bullish following a recent solid trading update and strong demand and pricing for agricultural products.

FY results

GNC recorded a 27% rise in FY10 net profit to $80.2 million, with the result coming in comfortably within company guidance of $75 million to $90 million but at the lower end.

This result was built on a 20% on year jump in revenue to $2 billion.

The contribution of GNC’s new malt business was a key driver of the result, although this was offset by a slump in trading revenue due to a decrease in grain prices.

GNC was cautious about its outlook and refused to provide FY11 guidance, saying instead there was continued uncertainty on grain volume and quality, as well as harvest timing.

GNC declared a final dividend of 10 cents per share, whilst its share price sank 9.6% on its uncertain outlook.

Looking ahead

GNC is poised to grow as an integrated, international and competitive agribusiness.

Australia supplies 15% (approximately 140 mmt) of globally traded wheat and barley.

With the world population set to grow and with 40% of this growth in countries where Australia has a grain supply freight and quality advantage, we feel GNC is in a prime position.

Wheat and barley import demand is forecast to grow by 2.5% per annum over the next 8 years.

Graincorp will continue to look at organic growth and accretive acquisitions.

A higher Aussie dollar remains a threat for GNC’s huge export business. Any pullback in the Aussie dollar would give GNC further upside.

GNC has reduced its core debt gearing to less than 25% in recent years. This low debt structure provides GNC with a solid platform for growth, making it one of the stocks to watch.

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Wesfarmers (WES) is Australia’s leading conglomerate, headquartered in Perth, Western Australia.

Since listing on the ASX in 1984, the company has recorded strong growth in assets and profits.

Wesfarmers owns several iconic Australian businesses, including supermarket chain Coles, hardware retailer Bunning’s Warehouse, discount department stores Target and K-Mart, and office supplies provider Officeworks. WES also involves in industrials supplies distribution, coal mining, fertilisers, chemicals and general insurance.

WES is also one of the market’s blue chip stocks and has been considered among the shares to buy for a number of years.

WES reported its third quarter retails sales results today, with the results coming in above market expectations.

Standout supermarkets

The Coles business was the standout performer, with its Food and Liquor division sales growing by 7.1% and Convenience division sales increasing by 12.1%. These numbers beats its long term rival Woolworths (WOW) which only achieved 4.6% growth in its Australian Food and Liquor division.

We believe Coles has been stealing market share from Woolworths over the past few months, on the back of its aggressive expansion and discounting strategy.

Bunnings also delivered impressive results. The home improvement businesses grew its sales by 8.1%, also beating consensus estimates on the back of enhancements made to its customer offering and solid sales contribution from newly-opened stores.

Officeworks also delivered positive growth despite challenging operating conditions and subdued spending from small businesses. The office supplies division achieved 3.5% growth.

Target sales declined by 0.1%, due to the continued price deflation in general products, and lower volume of sales in electrical products. Target did manage to somewhat offset this by solid growth in apparel and homeware products.

Kmart sales slightly disappointed, with revenue falling by 2.5% due to price cuts. The lower prices has helped Kmart to increase its overall sales volume and may help them to grow its market share, which we believe will benefit the business over the longer term.

Shares not on sale

WES is trading at 16.5 times FY11 earnings, which looks fairly valued at current price levels.

If Coles continues to turn around and coal price remain solid, we do some further upside to WES’s valuation.

WES could also unlock significant value if it can spin off some of its non-core business, with some analysts finally losing patience with the company’s trademark diverse earnings base. Some investors have argued that WES has grown too big and has lost some operating efficiency due to the distinctive nature of businesses they currently own.

If WES spins off its fertiliser or general insurance businesses or its coal assets, it may help to unlock hidden value for WES shareholders. If these businesses were trading as standalone entities, they would undoubtedly attract greater takeover interest from domestic and international corporations.

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Woolworths (WOW) is primarily an Australian and New Zealand supermarket company, and is widely considered among the market’s blue chip stocks.

WOW has branched our beyond its supermarket business and has built a massive empire which boasts an array of brand retailers and a heavy sprinkling of supermarkets throughout every major city in Australia.

On 18 April, WOW reported a 5.1% increase in third quarter sales from a year earlier.  The group also reaffirmed its full year guidance of 5% – 8% profit growth.

WOW said that sales were impacted by continued price deflation as well as the recent natural disasters.

The trading environment was likely to remain difficult due to a combination of lower consumer confidence, inflationary uncertainty, potential rate hikes and a stronger Australian dollar.

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Coca-Cola Amatil (CCL) is an Australasian bottler for US-based The Coca Cola Company.

CCL manufactures, sells and distributes Coca-Cola products, including carbonated soft drinks, mineral waters and other non-alcoholic beverages, plus packaged fruit.

CCL was one of the shares to buy in the first half of 2010, surging from $10.50 to a high of $12.51 in October.

On 21 March, CCL signed a 10 year agreement with US-based Beam Global to manufacture, sell and distribute its premium spirits portfolio in Australia.

Beam will continue to deliver the portfolio’s advertising, sponsorship and promotions.

Due to its increased responsibilities, CCL expects its working capital to increase by between $30 million and $35 million.

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Foster’s Group (FGL) is a brewing and wine company with a global presence, and whose core operations include Carlton and United Breweries, Beringer Blass Wine Estates, and Fosters International.

Foster’s Australia is involved in the manufacture and sale of beer, spirits, ciders and other beverage products. The company also operates four major breweries across Australia.

On 22 December, FGL confirmed that current CEO, Ian Johnston, will leave his post once the separation of the company’s beer and wine businesses is complete.

The group also appointed the board members and CEOs of the two divisions, which are expected to be separated by the first half of calendar 2011.

As a result, FGL will be one of the stocks to watch in the early parts of next year.

Wesfarmers (WES) is a major diversified Australian company that covers a wide scale of industries.

These include retail, home improvement and building supplies, coal mining, gas processing and distribution, industrial and safety product distribution, manufacturing of chemicals and fertilisers and insurance.

The company is also widely considered among the market’s blue chip stocks.

On 21 October, WES reported its first quarter sales and coal output numbers.

Sales at Coles grew 5.9% on-year, outpacing Woolworths’ 3.2% gain yesterday. WES attributed the result to new store openings, and better quality fresh food.

Kmart and home improvement sales were up 3.7% and 3.9%, respectively, driven by in-store improvements and lower prices.

However, Target sales declined 1.4% amid tough trading conditions due to an extended period of cold weather, and price deflation.

At WES’ Curragh Mine, coal output declined 9.4% from the previous quarter, with unseasonable wet weather impacting the production of its metallurgical coal production.

Bengalla coal production fell 24.7%, also due to wet weather, whilst Premium output rose 12.9% as it became the sole supplier to Verge Energy from 1 July, 2010.

WES shares jumped 2.5% on the day, making it one of the better performers in the Australian share market.

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Woolworths (WOW) is primarily an Australian and New Zealand supermarket company, and is widely considered among the blue chip stocks in the Australian share market.

Woolworths has branched our beyond its supermarket business and has built a massive empire which boasts an array of brand retailers and a heavy sprinkling of supermarkets throughout every major city in Australia.

On 20 October, WOW reported a 4.1% increase in first quarter sales, to $13.9 billion.

Supermarket sales increased 3.2% in the face of a tough retail environment and low food price inflation.

Big W sales fell 2.7% amid tight consumer spending and price deflation in key categories including home entertainment and toys.

WOW shares dipped 0.3% on the day.

AWB Limited (AWB) is an agricultural company, providing two main businesses focusing on rural services and commodity management.

AWB is a hot stock after increasing its forecast for wheat sales this year, amid concerns about supply shortages in northern Europe.

AWB upgraded its forecast for wheat pool returns by $9 to $22, sighting supply shortages and a bumper harvest in central Queensland due to recent rain.

As a result, AWB stated there is now very strong interest in Australian wheat and should be one of the stocks to watch.

AWB shares climbed 0.3% yesterday.