Independent grocery and hardware supplier/wholesaler Metcash says losing a key supply contract to the 7-Eleven convenience store chain from next year has forced it to make write-downs and asset impairments totaling more than $310 million.
The group revealed the cost of the impairments ahead of the release of its latest half-year results tomorrow which will reveal a big loss and lower earnings before the impact of the write-downs.
Metcash revealed early in November that it had lost the $800 million a year supply deal with 7Eleven from August 2020.
It told the ASX that it would recognise the impairment in its half-year results, which covers the six months ending October 31.
The non-cash impairment will primarily be to Metcash’s goodwill. Part will also cover other assets in the company’s food division.
Metcash is the primary supplier to IGA independent supermarkets across Australia, and also supplies Mitre 10 and Home Timber & Hardware home improvement stores.
Metcash also revealed a $15 million impact on its earnings before interest and tax (EBIT) in its food division from the loss of the 7-Eleven contract.
It’s the second goodwill impairment Metcash has taken in two years, with the company shocking the market with a $352 million write-down against goodwill after losing a major supply contract.
Metcash says it will implement other cost savings in an effort to offset the loss incurred by the contract end, but noted under Australian Accounting Standards, goodwill assessment cannot factor in future cost savings.
Metcash shares fell 1.3% to $2.91.