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Avnet Q4 sales, profit hit as resellers keep wallets shut

Currency headwind didn't help either

Avnet sales and profit in Q4 slumped across both its components and tech solutions businesses on the back of a summer slowdown in reseller spending and a blistering currency headwind.

Turnover for the period ended 30 June fell 8.8 per cent to $6.3bn, operating profit dropped by just over a fifth to $213.4m and net profits sunk 44.1 per cent to $133.4m.

CEO Rick Hamada, said revenues were "below our original expectations" in both the Technology Solutions (TS) and Electronics Marketing (EM) units "as customers grew more cautious towards the end of the quarter".

He added that approximately one third of the year-over-year revenues drop was due to the "translation impact of currency".

In components biz EM, sales were down 5 per cent to $3.76bn and operating income fell to $191m from $232m in fiscal Q4 2011.

The TS division was also squeezed, down 13.8 per cent to $2.54bn, as all regions posted declines but EMEA was worst hit, falling nearly 23 per cent to $676m. TS group operating profit was flat on a year ago at $67.5m, largely it seems due to US operation.

"Similar to our components business, TS experienced a weaker than expected June as a number of [reseller] customers in both the Americas and EMEA chose to defer their final purchasing decisions during the last two weeks of the month," said Hamada.

He said the focus for TS EMEA, "which has been dealing with the relatively weakest end market environment", was on improving profitability.

Last month Avnet confirmed cost-cutting plans for the UK and said it was shifting resources to higher growth areas.

Rival distie Arrow is also cutting its cloth accordingly, reducing overheads by another $20m, taking its total savings target to $50m for the year.

But Hamada sought to apply the necessary gloss to Avnet TS, saying that in buying Magirus, which turns over $500m a year, it will bolster the portfolio of storage, virtualisation and cloud computing in EMEA.

The acquisition will also likely provide scope for efficiency gains in business areas including HR, IT and finance and credit once it has been sealed around the October timeframe. ®


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