Arrow warns on tightening component sales

Hefty distie reports bumper Q2, looks ahead with worry

Global distributor Arrow Electronics has warned Q3 forecasts will fall short of analyst expectations as it is anticipating a slowdown in components shipments.

The distribution heavyweight today reported a 20 per cent hike in sales to $5.54bn, up 6 per cent sequentially for Q2 ended 2 July, but excluding the currency headwind and pro forma for acquisitions, turnover rose just 3 per cent.

Operating profits for the period ended 2 July climbed 30 per cent on a year ago to $253.6m and 8 per cent on last quarter.

CEO Michael Long said it continued to pilfer business from rivals, adding "we remain focused on growing sales ahead of the market".

Sales at the Global Component division moved up 19 per cent to $3.87bn, but were flat sequentially and below seasonality due to a softer market in Europe.

The return on working capital fell 830 basis points year-on-year. According to chief bean-counter Paul Reilly, this was "primarily driven by higher inventory levels due to a buildup in customer inventories".

The Electronics Computing Solutions unit grew 23 per cent on a year ago to $1.66bn, and 25 per cent on last quarter, including double-digit rises in services, security, industry standard servers and virtualisation.

Reilly noted double-digit growth for ECS "in all regions except UK, which experienced weaker market conditions".

Guidance for Q3 is $5.15bn to $5.55bn, lower than the $5.73bn estimated by financial analysts and somewhat lower than Arrow would seasonally call.

"This was due to a modest oversupply of inventory in the supply chain as well as uncertainty surrounding the global macroeconomic outlook. Due to these factors, we believe third quarter sales will be in line with the low end of normal seasonality," said Reilly. ®