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

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.

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


Shares in the company were up 1.81 per cent at $2.82 after 15 minutes of trade on Thursday, but have still lost 4.4 per cent since the impairments were announced on Tuesday.

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 said first-half growth in supermarkets wholesale sales ex tobacco has continued in the first five weeks of the second half, not accounting for the impact of Drakes supermarket separating and opening its own $125 million distribution centre in South Australia in September.

Drakes’ decision to go it alone is expected to weigh on the Metcash full-year result.


* Revenue up 1.6pct to $6.29bn

* Net loss $152.5m vs $95.8 profit pcp

* Fully franked interim dividend down 0.5 cents to 6.0 cents

Extracted from Nine News