SIGMA has opted out of an extension to its current Chemist Warehouse and My Chemist (CW/MC) distribution agreement due to expire end Jun 2019, saying the decision "provides a clearer future" for the company and shareholders.
EBOS has announced this morning it has been awarded the tender for a five-year supply agreement for more than 400 CW/MC stores in Australia (PD breaking news).
Both parties expect to enter into a deal to take effect from 01 Jul 2019 with a further potential three-year extension.
EBOS estimates that sales to the Chemist Warehouse group stores will generate about $1 billion in revenue in the first year of the agreement.
EBOS Group ceo John Cullity said "to be selected as a trusted partner by Chemist Warehouse Group reinforces our capital investment strategy and reflects the efficiencies we have made over a number of years to our operation".
Sigma noted that its current contract with Chemist Warehouse runs through to June 2019, but discussions "have reached the stage where the proposed terms for a contract extension could not be agreed.
"We made it clear at the start of the negotiations that we would only enter into a new contract if it made commercial sense...we are not prepared to risk significant shareholder funds without adequate and sustainable returns," said Sigma ceo Mark Hooper.
Sigma has also revised its profit guidance to an underlying EBIT of about $75 million for 2018/19 and between $40m and $50m for 2019/20, reflecting a "continuation of softer market conditions".
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