CHS reveals upturn in Q3 profits

Results Rise helps to calm investors' fears following speculation surrounding withdrawal from Vobis acquisition.

CHS Electronics has calmed investors' fears by announcing a massiveurrounding withdrawal from Vobis acquisition. profit increase in its third-quarter results, but admitted it was slowing down its acquisition plans to focus on organic growth.

Claudio Osorio, chairman of CHS, said there were no other significant European purchase targets left after the company recently backed out of the planned takeover of German distributor Vobis (PC Dealer, 14 October).

He said: 'We are taking a slower pace, mainly focusing on smaller acquisitions. It is important to see the company grows on its own.'

For the period ended 30 September, gross profit increased by 89 per cent to $160.3 million from $84.9 million for the corresponding quarter last year.

Net income also increased by 103 per cent from $11.4 million to $23.2 million for the third-quarter this year, while turnover almost doubled from $1.1 billion to $2.17 billion

The results, which surpassed analysts expectations, went some way to calm market concerns about CHS as its stock fell to its lowest point for a year recently as a result of speculation that it had pulled out of the Vobis acquisition because it could not raise the capital required for the $660 million deal.

Osorio insisted the deal had collapsed because Vobis' owner Metro had failed to meet some of the conditions.

However, Vobis denied this and claimed CHS was not able to pay the purchase price 'despite extensions to the original terms'.

While Craig Toll, chief financial officer at CHS, refused to expand on Vobis' comment, he said the company would now focus on purchases small enough to be paid from earnouts in cash or stock.

Before the results were announced on 2 November, the stock rebounded sharply, rising 50 per cent in value in two days to $15.30.

CHS credited strong global demand for storage and good PC sales in Europe for the increase and said these trends offset weaknesses in its key Latin American markets.