High stockholding levels of hard disk drives helped Ingram Micro boost profitability during a robust Q4 2011. The broadliner is braced for European uncertainty to affect growth this year, but is fostering plans to be "more aggressive" with mergers and acquisitions.
Sales for the three months to the end of December were up fractionally on the corresponding period last year and stood at $9.95bn (£6.3bn). Quarterly operating profit rose 5.3 per cent to more than $176m, equating to operational margins of about 1.8 per cent.
For the full year, revenue grew five per cent annually to more than $36.3bn, although operating income fell 5.3 per cent to $458.6m. The distributor's profits were hit during 2011's opening quarter by a botched rollout of a new SAP system in Australia. The cost is still being counted down under, and Ingram is not expecting to break even in the country until the end of this year.
In a conference call, transcribed by Seeking Alpha, recently appointed Ingram chief executive Alain Monié claimed that "a favourable inventory position and pricing environment" for hard disk drives (HDD) has allowed his company to boost gross margin in 2011.
HDD shortages have been reported since last autumn, when the fallout of the Thai floods affected supply chains.
"Europe delivered record-high operating income, benefiting the most from our inventory position of hard disk drives," said Monié. "Our anchor countries of Germany, France and the UK had solid quarters based on relatively solid spending in our key assembly market and in corporate sales, which helped offset continued weakness in retail."
Monié claimed the uncertainty currently enveloping Europe gives him pause as regards growth plans for 2012, but said no kneejerk reaction is required as yet.
"If we see any movement downwards that would warrant a structural adjustment, we will do so," he said. "We've done it a couple of times in the past. [But], at this stage, we are not looking at [that]. We have no plans for that. We need to understand the market better."
The distribution chief picked out "three key imperatives" for the coming year. The first of these is to "improve productivity" in the firm's "traditional distribution business". The second priority is to accelerate growth across higher-margin businesses, and the third is to invest in newer technologies, such as cloud.
Monié told analysts that he will need to appoint a chief operating officer, a role he himself held until three weeks ago. The preference is to find the right candidate internally, he said, but all avenues will be explored.
The broadline boss claimed that Ingram will look to ramp up "greenfield investments this year", and will also get "a little more aggressive at looking at what's out there in M&A".
"Turning to our outlook for 2012, as we look to the full year, we currently expect revenue growth in line with IT spending forecast of low to mid-single-digit growth," he added.
"For our first quarter, revenues are currently expected to be flat to slightly down compared to the year-earlier period. This is due to expected year-on-year declines in European revenues driven primarily by continued uncertainty surrounding the economy and expectations for a year-on-year decline in Australia's revenue contribution."
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