Avnet hails strong Q1 results

Despite a slowdown in growth and a "challenging" macroeconomic environment, distribution giant still sees an increase in turnover

Avnet has seen a slight rise in turnover for its first fiscal quarter of 2012, with its Technology Solutions (TS) business the shining star of the business.

In the three months ended 1 October 2011, the Arizona-based distributor posted total turnover of $6.43bn (£4.01bn), an increase of 3.9 per cent compared with $6.18bn in the same quarter the previous year.

Net profit increased slightly, by 0.6 per cent to $139m, compared with $138.2m in Q1 2010.

Rick Hamada (pictured), chief executive of Avnet, said: “Our team delivered a strong Q1 performance despite a challenging macroenvironment. After seven consecutive quarters of strong year-over-year growth, our business slowed this quarter as pro forma revenue was roughly flat year over year in constant currency.

“While Q1 is typically our weakest revenue quarter, the actual sequential revenue decline we experienced this year was more than normal seasonality due primarily to the double-digit sequential revenue declines experienced in our EMEA region at both operating groups after adjusting for the impact of acquisitions and currency.

“As a result, adjusted operating income came in roughly flat as compared with last year and operating income margin declined 13 basis points. Although it is difficult to forecast future demand in the current macroeconomic environment, we are encouraged by the speed with which the electronics supply chain is rebalancing and the relative strength of our computer business outside of EMEA. We remain confident that our experience through many industry cycles will continue to serve us well as we work through the current environment and we continue to focus on driving long-term shareholder value creation."

The firm’s TS business saw a 1.9 per cent revenue growth to $2.6bn, with software growing more than 40 per cent and hardware increasing by 30 per cent. Operating profit margins for the TS business increased 28 basis points to 2.5 per cent, with all three regions contributing to the improvement.

Hamada said: “Despite our top-line growth challenges in EMEA, TS delivered year-over-year improvements in profitability and returns this quarter across all three regions. In the Americas, pro forma revenue grew 13 per cent year over year and operating income margin was up both sequentially and year over year. Pro forma revenue in Asia grew 35 per cent year over year and operating income margin increased 60 basis points, the fourth consecutive quarter of year-over-year improvement in this important metric. In EMEA, gross profit margin was up significantly year over year, and operating income margin increased both sequentially and year over year despite the challenging market conditions.”

He added: “The improvements in TS performance this quarter demonstrate the potential for increased profitability as we continue to apply our portfolio management discipline across the business and leverage the investments we have made in higher growth markets. We remain committed to the attainment of our long-range financial targets."

Avnet’s board also approved a $500m share repurchase programme in the summer and has currently bought back about five million shares.

Looking forward, the distributor revealed it expects total sales to be in the region of between $6.45bn and $7.15bn.