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Grocery giant takes a $237 million hit after losing a deal with 7-Eleven

Metcash on Tuesday reported a writedown of 237.4 million Australian dollars ($162.5 million), just weeks after it disclosed the end of its supplier agreement with the convenience store chain.

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In addition, the split will likely lead to a loss in operating profit of roughly 15 million Australian dollars ($10.3 million) this year, after accounting for cost savings, the company said.

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Metcash shares dropped 1.4% Tuesday afternoon in Sydney.

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About 800 million Australian dollars ($547.6 million) of Metcash’s annual sales come from 7-Eleven, mainly through the supply of tobacco products.

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The Australian company announced last month that it had failed to reach an agreement with 7-Eleven over supply requirements for its outlets on the east coast of Australia, including factors such as “delivery routes and scheduling.”

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Metcash ultimately decided that these requirements would be “uneconomic” for its convenience store business, it said in a stock exchange filing at the time.

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The distributor was still in talks, however, to continue a partnership with 7-Eleven in other parts of the country, it added. It also said it would explore ways to “help offset” the expected hit to its business.

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Metcash’s current contract with 7-Eleven is set to end in August 2020.

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