Avnet increases profitability despite Q2 sales drop

Distributor enjoys margin boost but sales environment remains challenged for both components and value-add wares

Avnet boosted its profitability during its second fiscal quarter of 2012, despite the tough economic climate eating into the distributor's revenue in most areas of the business.

For the three-month period to the end of December, the Arizona-based firm saw global sales decline marginally year on year to just under $6.7bn (£4.3bn). But adjusted operating profit was up 3.4 per cent to $265.4m. This equates to a rise in operating margins from 3.8 per cent in Q2 last year to four per cent this time.

The distribution giant's components-focused Electronics Marketing (EM) division saw reported revenue grow one per cent to a little less than $3.6bn. Asian sales were down marginally to $1.25bn, while EMEA revenue plummeted 12.6 per cent to under $1bn. These losses were offset by growth in the Americas of 14.9 per cent.

Value-add division Avnet Technology Solutions fared less well, with global reported turnover dropping 3.5 per cent to $3.1bn. Sales in the Americas dropped 9.6 per cent to $1.65bn, while EMEA revenue fell 3.8 per cent to just over $1bn. Asia was the division's brightest spot, with sales growing more than 30 per cent to $443.5m.

Avnet chief executive Rick Hamada (pictured) said: "While the macro environment presented some top-line challenges, our team did a good job adjusting to market conditions and delivered another strong quarter with improvements across many parts of our business.

"With EMEA expected to return to more normalised seasonal growth in the March quarter and an outlook for continued investments in IT datacentres, we remain confident we can continue to grow earnings organically and supplement that growth with investments in value-creating M&A and our share repurchase programme."