Sigma shares plunge

The healthcare group’s stock has dropped to a 12-month low in wake of its shock announcement to commence legal action against the My Chemist/CWH group

Sigma Healthcare’s shares have plummeted from $1.185 before the announcement to $0.755 as of midday 25 May—a drop of 36% within less than two days.

The group announced Wednesday morning that it has commenced legal proceedings after the My Chemist/Chemist Warehouse group said it would start purchasing medicines from a different wholesaler.

Sigma shares plummet. Source: Market Index 11:42am.

A writ lodged by Sigma in the Victorian Supreme Court alleges My Chemist owner Mario Verrocchi told Sigma chief executive Mark Hooper that it would begin buying some products made by drug maker Sandoz from another wholesaler after receiving a “deal” which it “cannot ignore because of its quantum”, reports the Australian Financial Review.

Sigma maintains that under the existing agreement, My Chemist/Chemist Warehouse is not entitled to do this.

It also said that My Chemist/Chemist Warehouse rejected offers of mediation and binding arbitration which had been proposed during discussions.

“If MC/CW acts in accordance with their stated intention, the impact on Sigma’s EBIT is expected to be approximately $5m – $10m per annum,” said Sigma in a statement.

“While Sigma remains confident of its position, this action, combined with a continuation of the subdued start to the financial year, may mean that current year underlying EBIT could be up to 5% below FY2016/7 (subject to the outcome of the proposed proceedings).

“Ongoing legal costs will also impact earnings.”

‎Chief Operating Officer of the ‎Chemist Warehouse Group, Mario Tascone, told AJP: “Chemist Warehouse have no comment given the subject is now a matter of legal proceedings”.

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  1. Peter Allen

    so a third drop in price for a $5m drop in profits. Is this not a buying opportunity?
    [My advice in the past has been to buy high, sell low, so my $0.02]

    • Owner

      How much profit will they lose once CWH leaves them all together…

      • Peter Allen

        Thirty per cent? I don’t think so.
        And I see no reason why people should use anon names here.

  2. Tony Lee

    I agree with Peter. If you look at their financial profile there is little to loose buying.
    Their problem as with many pharmacies is relying on an a large but unreliable income source.
    C/W are very clever business people & will always seek the best return, and backed up by legals that they can afford (& have factored in); more than you can say for Sigma.

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