Recession takes its toll on Ingram Q1 results

Distribution behemoth sees turnover and profit hit in all regions, but is confident it will emerge in good shape the other side of the downturn

Distribution giant Ingram Micro has claimed it is on track to emerge from the recession ‘stronger’ and ‘more agile’, despite posting a 21 per cent drop in sales and seeing profit plummet by 57 per cent for the first quarter 2009.

Turnover for the quarter ended 4 April 2009, was $6.75bn, compared to $8.58bn in the same quarter a year ago. Profit for the quarter stood at $27.5m, compared to $64.1m in the same period a year ago.

Chief executive Greg Spierkel, said: “While the soft macro-economic environment continues to dampen sales, we are making excellent progress towards improving long-term profitability and reshaping our business to help us emerge from the downturn stronger and more agile.

“During the quarter we deployed optimisation plans in every region, which will generate significant business improvements in the coming months. At the same time, we continue to invest in our future, improving our business mix and developing better systems that improve customer service, marketing and e-commerce.

“For example, we recently announced agreements to acquire two distributors in the Asia-Pacific region that strengthen our capabilities in the enterprise and data-capture markets. The economy is not preventing us from making small, yet strategically significant acquisitions in markets where it makes sense. We’re carefully balancing the needs of today with actions to create a more prosperous future.”

Breaking the results down, EMEA sales, which account for 34 per cent of total revenue, decreased by 26 per cent to $2.27bn, compared to the $3.07bn in the same quarter a year ago. Ingram said the weaker European currencies had a 14 percentage point “negative effect” on comparisons to the prior year. Profit for the region hit $15.1m compared to $26.8m a year ago.

North American sales, which account for 41 per cent of total revenues, dropped by 16 per cent to $2.77bn, compared to the $3.29bn posted a year ago. Profit hit $12.8m, compared to $40.6m last year. Asia-Pacific sales (20 per cent of total revenues) decreased by 24 per cent to $1.38bn, compared to $1.81bn last year, with profit dropping from $32.5m in 2008 to $13.8m. Latin American sales (five per cent of total revenues) dropped 21 per cent to $321m, compared to $407m in Q1 2008. Profit fell from $7.8m in 2008 to $5.1m.

Looking forward Spierkel painted a realistic picture of the months to come.

“With the recession now affecting all regions, we do not expect a pick-up in sales for several more months, perhaps for the remainder of the year. However we don’t feel the market getting worse at this stage and expect Q2 sales to follow a historical seasonal pattern.

“We expect year-over-year sales comparisons to be negatively affected by the translation impact of relatively weaker foreign currencies as well as the timing of the Easter holidays, which occurred in the first quarter in 2008 and in the second quarter this year. We should see additional benefits of our expense-reduction programs. The results of last year's program are now fully realised, generating annualised benefits of more than $20 million,” he said.

Spierkel added that the distributor is ‘gaining traction’ with the cost reduction program announced during the first quarter of the year.

“I’m confident that the actions we are taking today will make us stronger and more profitable when demand returns,” he said.