Metcash Limited (ASX: MTS) announced this morning that it is planning a potential new distribution centre in South Australia. However, Drakes Supermarkets will not make a commitment to have its supermarkets supplied by this new distribution centre.

Metcash is the national supplier of IGAs, Cellarbrations, Bottle-O, IGA Liquor, Duncans and Thirsty Camel stores around Australia, it also owns Mitre 10 and Home Timber & Hardware.

In a statement to the ASX, Metcash said that the new distribution centre, if approved and constructed, will enable local independent suppliers in South Australia to benefit from significant operational efficiencies. It has done site identification work and is now preparing for regulatory approvals.

Total sales including tobacco to Drakes Supermarkets in South Australia were around $270 million in FY18. Metcash has an agreement to supply Drakes until June 2019 and it doesn’t know of an intention to change the Drakes Queensland supply arrangement.

Metcash said it will review the carrying value of its goodwill and other assets.

Trading update

Metcash said the supermarkets & convenience segment is expected to show a 1.2% decline in total sales and a 3.6% decrease in wholesale sales excluding tobacco for the financial year ended 30 April 2018 (FY18). FY18 supermarket and convenience earnings are expected to be in line with FY17.

The Metcash share price is currently down 13.3% according to Google Finance.

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