Chemist Warehouse in Sigma sights

SIGMA Healthcare yesterday warned that a plan by My Chemist/ Chemist Warehouse (MC/CW) to source products from an alternate supplier could hit the Sigma bottom line by as much as $10 million this year (PD breaking news).

The company confirmed the launch of legal action against the key customer, saying it had been in ongoing discussions with Chemist Warehouse in relation to aspects of its current Supply Agreement with the group, and had made offers of mediation and binding arbitration which had been rejected.

“As a satisfactory resolution has not been reached, Sigma has now decided to commence legal proceedings against MC/CW,” the company announced.

Sigma maintains that under its agreement with the retailer MC/ CW is not entitled to acquire products from another CSO wholesaler, with the company seeking “declarations and injunctions for specific performance of the agreement”.

“If MC/CW acts in accordance with their stated intention, the impact on Sigma’s EBIT is expected to be approximately $5m-$10m per annum,” the company said, along with a warning that ongoing legal costs would also impact earnings.

“Sigma values the relationship with MC/CW and will continue to provide operational support to MC/ CW in accordance with the terms of the current Supply Agreement which runs to June 2019,” the formal ASX statement added.