My Chemist/Chemist Warehouse Group faces legal action from supplier

Sigma Healthcare is planning legal action against the My Chemist/Chemist Warehouse Group over an alleged breach of a supply agreement, sparking a dive in its share price. 

The group owns the Chemist Warehouse chain, which entered a compliance partnership with the Fair Work Ombudsman in December due non-payment of wages for compulsory online training undertaken by staff outside of normal working hours.

Sigma said its proposed action relates to the My Chemist/Chemist Warehouse Group’s intention to obtain certain products from another wholesaler, which Sigma maintains it is not entitled to do under their existing agreement.

If the My Chemist/Chemist Warehouse Group buys products from a different wholesaler, Sigma’s earnings would take an estimated annual hit of between $5 million and $10 million.

Sigma said the commencement of legal action, combined with a subdued start to its 2017/18 fiscal year, may mean its annual underlying earnings before interest and tax will fall by five per cent from 2016/17.

The pharmaceutical company said it decided to commence legal proceedings after the My Chemist/ Chemist Warehouse Group rejected offers of mediation and binding arbitration. The current supply agreement between the companies runs to June 2019.

This article first appeared on sister site Inside FMCG.