Metcash and Charter Hall to build giant Gepps Cross distribution centre

ALMOST six months after its share price plummeted on the back of a key customer withdrawing its services, a leading Australian wholesale distribution and marketing company is set to build a giant new distribution centre in Adelaide’s northern industrial suburbs.

Almost six months after its share price plummeted on the back of a key customer withdrawing its services, a leading Australian wholesale distribution and marketing company is set to build a giant new distribution centre in Adelaide’s northern suburbs.

The ASX listed Metcash has signed a long-term lease with Charter Hall for the construction and leasing of a new ‘best in class’ distribution centre in Gepps Cross.

The new 68,000sq m build will replace the existing Metcash centre at Kidman Park and is expected to deliver operational efficiencies for its independent retailers across South Australia. It will provide local suppliers with a route to market for their products through Metcash’s extensive distribution network.

The announcement follows a Metcash release in late August where it revealed it had entered a long-term agreement with Foodland multiple store owners the Romeo’s and Chapley’s as well as the remaining members of the Foodland supermarkets board who are owners of Foodland supermarkets in SA (but excluding Drakes supermarkets).

These supply agreements were dependent upon Metcash entering into a lease agreement for the new distribution centre by next month.

Metcash chief executive, Jeff Adams, said the long term investment in SA reflects the Metcash focus on championing their retailers’ success.

“Our retailers network will benefit from a greater range of grocery and perishables that will further underpin their ability to provide a quality, differentiated offer that is tailored to their local community.

“Our independent retailers already include some of the best stores in the world and we expect today’s announcement will further strengthen the foundation for continued investment in the network,” Mr Adams said.

Construction is scheduled for completion in mid 2020.

Metcash suffered a major blow in May when Drakes Supermarkets – with whom it had an agreement to supply its SA stores – announced that it would not be committing to have its supermarkets supplied from Metcash’s proposed new SA distribution centre.

The Metcash share price which stood at $3.68 before the May announcement dropped to $2.48 by early July but has since recovered to $2.80.

At an August AGM, Metcash management advised that the loss of the Drakes Supermarkets supply contract in SAa was not expected to have a material impact on its supermarket earnings in the financial year 2019.

Metcash, which has been running since it began as a Sydney corner store 1927, had sales of more than $14 billion. in the 2018 financial year.