Metcash shares have slumped to a 10-year-low after the grocery wholesaler flagged another earnings slide and admitted its much hoped for turnaround could be another year away.

The owner of the IGA Supermarkets brand warned its underlying earnings are expected to fall by up to 22 per cent to between $315 million and $330 million in 2014/15.

The warning came as Metcash reported a nine per cent slide in its underlying first half profit to $101.7 million and cut its interim dividend by three cents to 6.5 cents as it diverts money towards its turnaround strategy.

• Generic items vs the big brands

The company will spend up to $675 million as part of a five-year project to lower prices and revamp stores in order to compete with rivals Woolworths, Coles, Aldi and Costco.

But the plan, named Project Diamond, started later that expected this year, possibly pushing back the point when the company is expected to turnaround until fiscal 2017.

“What we’d guided people to was that the bottom of the curve would be in FY15, but, in essence with the investment now starting later it’s actually going to bridge the two financial years (2015 and 2016),” chief executive Ian Morrice told reporters on Monday.

The disappointing result saw Metcash shares dive 43 cents, or 16.5 per cent, to $2.18 on Monday, a level not seen since 2004.

OptionsXpress market analyst Ben le Brun said it was the latest in a string of disappointing results for the company.

“It was another horror result and the shares are being punished accordingly,” he said.

Metcash’s profit dived nearly 18 per cent to $169.2 million last year.

Mr Le Brun said the company had been caught in a downward spiral for years amid sliding grocery prices, weak consumer sentiment and tough competition.

“Aldi and Costco can really compete with Woolworths and Coles on price, whereas Metcash struggles a little bit,” Mr Le Brun said.

But Metcash pointed to a one per cent increase in sales during the first half as a sign the turnaround was gaining pace.

And Mr Morris said sales picked up in October as 425 stores joined the delayed Diamond Store Accelerator program.

He said the location of Metcash stores provided it an advantage over competitors and the key now was to offer customers better value.

Mr Morrice also said the dive in Metcash’s share price did not reflect the value of the company.

“It will take the market time to digest the underlying positives in the result to offset the guidance that was put out there this morning,” he said.

“If people look at the fundamentals of our stock and how in was valued in the previous result I would say the reaction does not fully reflect the value of Metcash shares.”

ANOTHER PROFIT SLIDE FOR METCASH

• Sales up 1.0pct to $6.65b

• Underlying profit down 9.0pct to $101.7 million

• Net profit up 2.8pct to $101.7m

• Interim dividend down three cents to 6.5 cents, fully franked.