PHARMACEUTICAL wholesaler Sigma Healthcare has inked a deal with the My Chemist/Chemist Warehouse Group (CWH) to supply fast moving consumer goods (FMCG) from 01 Dec (PD breaking news yesterday).
The four and a half-year contract, which will ramp up to full capacity by July 2020, is expected to generate sales of $700-800 million in the first full year of operations.
Sigma MD and CEO, Mark Hooper, said, "Sigma understands what is required to provide effective support on these product ranges, and the financial terms of the new agreement provide an acceptable return on capital employed for Sigma shareholders.
"The investment we have already made in our distribution centres provides the efficient platform to absorb this volume, maintain our growth ambitions, and enhance our ability to better service our existing customer base which has achieved above market growth over the course of the year," he said.
The announcement comes less than five months after rival wholesaler, EBOS Group offshoot Symbion, replaced Sigma as CWH's first-line supplier for ethical products (PD 17 Oct 2018).
Restructuring costs associated with the end of Sigma's previous deal with the group saw its profit slump by 80% (PD 06 Sep).
Hooper said the new FMCG deal followed an approach by CWH for Sigma to resume the supply of the products "which had previously transitioned to another provider".
With the initial work and costs associated with the transition and the volume of stock movements, some of the company's promised Project Pivot transformation will be delayed, impacting the company's earnings guidance for FY20, Hooper warned investors.
"More importantly, we expect our growth to accelerate in FY21 and beyond as we benefit from contributions from Project Pivot, efficiencies from our distribution centre investments, and the progressive ramp up of the CWH contract," he said.
Full year 2021 guidance will be provided at the company's FY20 results announcement which is scheduled for 26 Mar next year, Hooper added.
The above article was sent to subscribers in Pharmacy Daily's issue from 26 Nov 19
To see the full newsletter, see the embedded issue below or CLICK HERE to download Pharmacy Daily from 26 Nov 19
