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IGA supplier slumps after losing 7-Eleven deal

Business

Metcash has slipped to a $152.5 million first-half loss on the back of the loss of its 7-Eleven supply contract.

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The IGA supermarket supplier says sales revenue for the six months to October 31 rose 1.6 per cent to $6.29 billion, but the bottom line was hit by the $237.4 million non-cash impairment announced last week following 7-Eleven’s decision not to renew.

Metcash chief executive Jeff Adams said the company was unable to reach agreement with 7-Eleven on its supply requirements for the east coast, including delivery routes and scheduling which he said would be uneconomic to the company.

The contract was worth an estimated $800 million in sales annually and is expected to result in a $15 million annualised earnings loss going forward.

Shares in Metcash have dropped by 6.1 per cent since the announcement and were worth $2.77 before trade on Thursday, a more than three-month low.

The company said it remains in discussions with 7-Eleven to continue supply in Western Australia, as well as a number of smaller categories on the east coast.

Hardware sales fell 1.3 per cent but Metcash says it anticipates medium-to-longer term strength in the sector as construction activity recovers from its current lull.

Metcash has reduced its interim payout from 6.5 cents to 6.0 cents but maintained a 100 per cent franking level.

-AAP

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