Ingram eyes cost base as sales tumble

Distribution giant Ingram Micro has warned of further restructuring across the entire company as it tries to make up for the shrinking global economy.

The firm released its fourth quarter and 2008 year-end financial results yesterday.

It blamed weaker foreign currencies and the credit crunch for its 13 per cent turnover slump for the quarter. Group turnover stood at $8.68bn (£6bn) for the quarter ended 3 January 2008, compared with $10.01bn (£6.97bn) in the same quarter a year ago.

Net profit also declined to $95.5m (£66.57m) for the quarter, compared with $114.1m (£79.54m) in 2007.

EMEA turnover, which accounted for 34 per cent of total sales in the quarter dropped 21 per cent to $2.95bn (£2bn), compared with $3.75bn (£2.61bn) in the same quarter a year ago.

Ingram’s financial statement also revealed that efforts in the second half of 2008 to deliberately exit or turn away unprofitable business, coupled with weak demand for technology products, contributed to the year-on-year decline.

For the full year 2008, the company posted a global operating loss of $332.2m (£231.5), which includes a goodwill impairment charge of $742.6m (£517.7). This is compared with a net profit of $275.9m (£192.3m) for the full year 2007. Turnover for the year stood at $34.36bn (£23.9bn), with North America contributing $14.19bn (£9.89) and EMEA contributing $11.53bn (£8.03bn), a decrease of seven per cent.

Greg Spierkel, chief executive of Ingram painted a cautious picture of the future, hinting at further restructuring in 2009.

“We expect 2009 to be even more challenging. Demand continues to soften across most of the countries in which we operate and the stronger dollar is also creating a translation headwind, affecting prior-year sales comparisons. Based on sales figures to date, we expect Q1 sales to experience a year-over-year percentage decline in the low- to mid-twenties, which includes the translation impact of relatively weaker foreign currencies.”

Spierkel added: "We continue to make adjustments to improve profitability and position us for the future. We've made good progress on our expense-reduction programme. However, we expect it will be difficult to reduce expenses in line with the pace of the current sales decline.

“We are taking additional actions in the first half of 2009 to accelerate this alignment, including further restructuring actions in Europe and North America. These actions are expected to generate savings of approximately $100 million to $120 million (£69.65m to £83.58m) annually, reaching the full run-rate at the end of 2009.”