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Metcash shares' biggest fall in six months

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Metcash shares have continued to fall, tumbling nearly seven per cent a day after the company said it sees more tough times ahead in the supermarket sector.

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The IGA and Foodland supplier’s shares were down 18 cents, or 6.8 per cent, to $2.45 at 10:03 ACDT this morning, compounding investor woes after a 5.0 per per cent fall the previous day.

Today’s decline is the biggest for Metcash since the 17.7 per cent fall that followed its May 28 announcement that a major South Australian customer – Drakes Supermarkets – would not be renewing its contract at the end of the 2019 financial year.

Drakes Supermarkets had shunned Metcash’s distribution centre in favour of constructing its own, saying it would not commit to Metcash beyond the June 2019 end of the parties’ current South Australia agreement.

The loss of the contract forced Metcash to make a $352 million impairment in 2018 full-year results, leading to a $149.5 million loss.

The company yesterday reported a three per cent lift in first-half profit, but chief executive Jeff Adams told investors there is little relief on the horizon for players in a supermarket sector dominated by Woolworths and Coles, and facing pressure from the expansion of Aldi.

“Highly competitive market conditions are expected to continue through the balance of FY19,” yesterday’s group update report says.

“(However) Working Smarter savings are expected to help mitigate the impact of difficult market conditions and const inflation.”

Adams said Metcash’s hardware division could also begin to feel the pinch from the softening property market.

– AAP

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