Metcash Limited (ASX: MTS) announced this morning that it will recognise a $352 million impairment to goodwill and other net assets in the Supermarkets & Convenience segment of its business.
Metcash is the owner of Mitre 10 and Home Timber & Hardware, it’s also the national supplier of IGAs, Cellarbrations, Bottle-O, IGA Liquor, Duncans and Thirsty Camel stores around Australia.
The company had been looking at the ‘carrying values’ of its assets on its balance sheet. It was looking at whether the assets were worth as much as the company had previously reported.
Metcash decided to make the impairment charge because of the previous announcement regarding Drakes Supermarkets in South Australia, as well as weakness in the WA economy and the ongoing competition in the sector from rivals like Woolworths Group Ltd (ASX: WOW), Wesfarmers Ltd’s (ASX: WES) Coles and Aldi.
The impairment comprises $318 million of goodwill and other intangibles, and $34 million of other net assets.
Management explained that these impairments are non-cash in nature, have no impact on the company’s debt facilities, compliance with banking covenants or its ability to undertake capital management initiatives.
The Metcash share price is currently showing a 5% expected drop at the open, according to Commsec.
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