Australian grocery wholesaler Metcash Trading has said its contract to supply Interfrank, which owns the Franklins grocery chain, is to expire at the end of January 2005.

“We are sorry to see the end of this relationship but it has become clear that it would not be possible for Metcash to retain the business on a profitable basis on the terms required by Interfrank,” Metcash Trading chief executive officer Andrew Reitzer was quoted by Dow Jones News as saying. 

Metcash said its expects the termination of the supply contract to result in a reduction of around A$600m (US$463.4m) in annual sales and an earnings reduction of 25 cents per share for fiscal 2005.

“When our supply contract with the chain was first negotiated, we established terms which were based on growth. The volumes sold to the Franklins chain have not met expectations, exerting pressure on Metcash’s margins in relation to this contract,” Reitzer added.