Global distribution giants Ingram Micro and Avnet dwelt on difficult trading conditions in Europe and North America after posting mixed financial results and offering an uncertain outlook for the rest of 2008.
Ingram Micro revealed it would be restructuring its EMEA operations and regional headquarters during the next two quarters at a cost of between $11m and $13m (£5.5m and £6.5m). The broadline behemoth said it hoped to generate $18m to $24m by doing this.
Ingram reported a 4 per cent rise in global revenue to $8.58bn during the first quarter of 2008, which covered the three months to 29 March. Operating profit was up 34.7 per cent to $99.3m although operating profit for EMEA was down 23.4 per cent to $26.8m.
Ingram's chief executive Greg Spierkel said: "We are pleased with the performance of our Asia-Pacific and Latin America regions, both of which grew at double-digit rates with good operating leverage. However, as we discussed in February, softness in the economic environments in North America and Europe is exerting pressure on our operations in those regions."
Meanwhile, Avnet's third quarter 2008 results for the three months to 29 March showed global revenue was $4.42bn (£2.23bn) an increase of 13.3 per cent on last year. However, worldwide operating profit was down 3.4 per cent on Q3 2007 to $166.8m.
Global revenue for Avnet's Electronics Marketing division was up 7.3 per cent to $2.62bn while operating income increased 8.4 per cent to $153.5m. EMEA revenue, however, was down 6 per cent on the same period last year. Worldwide revenue for the distributor's Technology Solutions division was up 23 per cent to $1.8bn but global operating income dropped 31.7 per cent to $41.3m. Revenue for EMEA was up 53.9 per cent.
Avnet chief executive Roy Vallee said: "We are extremely disappointed with our earnings for the third quarter as both operating groups were below our profit forecast. Our Electronics Marketing Group managed to slightly improve its margins and generated higher returns despite lower-than-expected sales. However, revenue weakness in some business units at Technology Solutions resulted in lower gross profit volume, which was further exacerbated by lower gross margins due primarily to the impact of rebates.
“This combination led to some unacceptable operating margin performances and, as a result, we have begun to take targeted corrective actions. We remain steadfastly committed to achieving our long-term margin and return goals."
Avnet predicted its Electronics Marketing division would perform in line with "normal seasonality" expectations in Q4 but counseled that its Technology Solutions branch would perform slightly worse. It forecasted a modest growth of sales to between $4.55bn and $4.75bn.
Ingram predicted revenue would show little or no growth in the coming quarter and would be between $8.5bn and $8.75bn. It forecasted net profit, which was $64.1m in Q1, would show no increase and could drop to $59m.
Spierkel said: "Our second-quarter guidance reflects continued economic softness in North America and Europe, with solid growth in Asia-Pacific and Latin America. The expected sequential sales growth is following a fairly normal seasonal pattern, with a modest benefit from slightly stronger foreign currencies compared to the first quarter.
“While we are taking the necessary steps to manage our cost structure in the current economy, we will continue to pursue activities that improve our infrastructure, generate greater customer loyalty, diversify our business mix and enhance margins. The company has proven its resiliency in similar economic environments and we will be stronger than ever when the economy rebounds.”
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