Arrow Electric CEO: Sales dip, profits fall but it's no 'overall disaster'

Keeps the champers in the fridge, for now

Arrow Electronics stopped well short of saying the recession has bottomed out as its components arm continues to wrestle with a tough biz climate, but an air of optimism hung over senior management.

Sales at the distie titan fell 4 per cent to $4.96bn, but this excluded $176.5m of services contracts now to be recognised on an agency basis - if this had been included, turnover would have dipped 1 per cent.

Operating income was down 21.68 per cent to $163.8m and net earnings were down by the same percentage to $10.6m.

Sales, general and admin costs fell by 2.3 per cent to $456.5m and Arrow said it was on course to realise $30m of cost savings this year, lower than the $50m it previously forecasted.

The Global Components unit slumped by eight per cent to $3.37bn: up 10 per cent in Asia Pacific; down a single digit in the Americas; and down four per cent in local currency in Europe.

Operating profit in the unit dropped to $155m from $194.1m in Q3 a year earlier.

CEO Michael Long said on a conference call with analysts that "sales in our core European businesses were in line with seasonality despite ongoing market softness across the region.

"Sales in the Americas were below expectations due to a somewhat weaker overall market, as well as customer cautiousness," he added.

In the Electronics Computing Solutions (ECS) division, sales climbed three per cent to $1.59bn and operating profit edged up also by three per cent to $55.27m.

"In Europe, the team delivered solid results in line with normal seasonality on a local currency basis, even as market conditions weakened somewhat in the region," said Long.

The CEO added: "On a global basis, solid year-over-year growth in storage, software was offset by a continued weakness in the server market.

He said although market conditions remained weak in Europe, sales were up $20m due to the "expansion of supplier lines in new geographies".

Arrow noted that competitive pricing across the group, most notably in the component arm, had driven down gross profits by 50 to 70 basis points.

Asked if the the IT market was bottoming our anytime soon, Long was non-committal.

"I don't know that I could tell you that it actually bottomed. What I can tell you is we did see a slight negative book to bill for the last quarter. And in October, we actually saw a positive book to bill.

"So when you take those, there is some relative mixed signals that October has started off fairly nice for us in the new quarter…But we're not seeing what I would call, an overall disaster in the business at this point. And things still seem to be relatively steady," he said. ®

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