Avnet posts double-digit growth in Q2

Vallee: This provides further evidence that the global economy has begun the next growth cycle

Distribution giant Avnet enjoyed a successful second fiscal quarter, with sales across the board seeing double-digit growth.

Revenue for the three months to 2 January grew 13.2 per cent year on year to $4.83bn (£3bn). Net income stood at $103.9m, a stark contrast to Q2 2009, when the distributor endured a $1.2bn loss after having to swallow a hefty goodwill charge.

Sales from Avnet's Electronics Marketing (EM) group reached $2.52bn in Q2 2010, an increase of 11 per cent on last year. Revenue from the EMEA and Asia regions spiked 11.8 and 35 per cent respectively, but sales in the Americas slumped 8.6 per cent. Worldwide EM operating profit was $92.2m, down seven per cent on last year.

Avnet's Technology Solutions (TS) unit grew sales by 15.8 per cent annually to $2.32bn. Revenue was up in the Americas, EMEA and Asia, with the latter posting a massive 136.5 per cent spike. TS operating profit rose 31.8 per cent on last year to $88.2m.

As of the end of Q2, Avnet had $895m in cash and cash equivalents. However, total debt exceeded that, leaving the company with net debt of $125m.

Chief financial officer Ray Sadowski said: "Although our team delivered substantially higher operating income with record working capital velocity, the rapid rate of sales growth required increased investments in working capital, resulting in negative cashflow from operations for the quarter.

"We continue to invest appropriately in profitable organic growth while maintaining our disciplined approach to value-creating M&A."

Avnet revealed it expects Q3 revenue of between $4.1bn and $4.7bn. The distributor's chief executive Roy Vallee claimed the robust second-quarter results spoke to the improving economic conditions.

"Avnet's strong growth this quarter provides further evidence that the global economy has begun the next growth cycle as sales at both operating groups came in well above normal seasonality and our upwardly revised expectations for the quarter," he said.