Avnet sees economic improvement despite drop in profit

Roy Vallee: Both operating groups delivered revenues that were above seasonality

Avnet has raised its head above the parapet and claimed an improved business environment as it posted its first quarter 2010 financials today.

The distributor reported Q1 turnover of $4.3bn (£2.6bn) – a 3.1 per cent drop on the same quarter in 2009.

Net profit for the quarter was $50.9m compared with net profit of $90.3m in Q1 2009.

Operating profit for the quarter was $889m, compared with $154.6m a year ago. Restructuring, integration and other items cost $18.1m which meant, without the charges, Q1 2010 profit would have been $107.1m.

Roy Vallee, chairman and chief executive of Avnet, said: “While the impact of the global economic slowdown remained evident in our year-over-year revenue decline, our better than expected sequential growth rates provides additional confidence that the business environment is improving.

“Both operating groups delivered revenue growth at a rate that was above normal seasonality, even excluding the estimated $400 million beneficial impact of the extra week in this fiscal period. This increased volume, combined with higher productivity and record asset velocity, drove a 399 basis point sequential improvement in return on working capital, demonstrating the operating leverage we have built into our model.”

Split into divisions – the overall Electronics Marketing (EM) business saw sales drop 9.8 per cent year on year and Technology Solutions (TS) saw sales increase 6.9 per cent year on year.