Metcash has announced a $237.4 million writedown against its major food division just days after revealing 7-Eleven would not be renewing its $800 million supply contract.
The food and beverage wholesaler announced its second major non-cash impairment in 18 months ahead of this week’s first-half earnings result, marking the latest in a string of disappointing updates for the IGA, Mitre 10, and Home Hardware supplier.
Metcash shares dropped more than 10 per cent to a four-month low last week after convenience chain 7-Eleven announced it would not be renewing its supply deal when it expires in August.
Meanwhile, lower food earnings and higher finance costs weighed on the company’s full-year result in June, while in FY18 the company slipped to an impairment-driven $150 million loss.
Metcash said on Tuesday the 7-Eleven development was also expected to result in an annualised earnings loss of $15 million in its food pillar, after adjusting for mitigating costs savings.
The company’s stock slipped by 2.4 per cent to a fresh seven-day trough of $2.88 in early trade but recovered somewhat to be 1.86 per cent lower at $2.895 by 1150 AEDT.
Total impairments since June 2018 have now exceeded $500 million while Metcash has faced increasing competition in the grocery space as traditional giants Woolworths and Coles announce cost-cutting measures to compete with Aldi and newcomers including Kauffmann, Lidl and Amazon.
The company also cycled through a number senior management and board changes during FY19, including the appointment of Chris Baddock as chief executive of the company’s liquor division, following Scott Marshall’s move to head up the supermarkets and convenience pillar in March last year.
Chief strategy and transformation officer Matt Havens joined from the Boston Consulting Group in April and chief information officer David Reeve replaced Edwin Gear following his retirement during the year.
Peter Birtles and Wai Tang also joined the Metcash board.
Metcash shares have slipped about 21 per cent since hitting a more than nine-year peak of $3.73 in May last year.