Sigma Healthcare is planning legal action against the My Chemist/ Chemist Warehouse Group over an alleged breach of a supply agreement, sparking a dive in its share price.
Shares in the pharmaceutical company fell 31 per cent to 81.5 cents, their lowest level since February 2016.
Sigma said its proposed action relates to the My Chemist/ Chemist Warehouse Group's intention to obtain certain products from another wholesaler, which Sigma maintains it is not entitled to do under their existing agreement.
If the My Chemist/ Chemist Warehouse Group buys products from a different wholesaler, Sigma's earnings would take an estimated annual hit of between $5 million and $10 million.
Sigma said the commencement of legal action, combined with a subdued start to its 2017/18 fiscal year, may mean its annual underlying earnings before interest and tax will fall by five per cent from 2016/17.
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The pharmaceutical company said it decided to commence legal proceedings after the My Chemist/ Chemist Warehouse Group rejected offers of mediation and binding arbitration.
The current supply agreement between the companies runs to June 2019.
