Ingram margins and growth stymied in Q2

Distributor blames aggressive market conditions and sales of lower-margin products

Ingram Micro was hit by exchange-rate headaches in 2012's second quarter, as the weakness of European currencies against the dollar wiped out solid growth, leaving sales and profits flat.

The distributor also chalked up the erosion of gross profit margins to greater reliance on sales of lower-margin products and aggressive market conditions.

For the three months to the end of June, the firm posted dollar sales of $8.8bn and operating income of $97.8m. Both figures are more or less flat on the corresponding period last year.

Global sales as measured in local currencies were up five per cent annually, with currency instability – particularly in Europe – eroding the broadliner's growth.

Gross profit, which stood at $452.7m, also took a hit in Q2, with margins dropping from 5.25 to 5.16 per cent of sales.

This was put down to a greater proportion of sales coming from high-volume, low-margin products and customer segments, as well as "a competitive selling environment".

North America performed solidly for Ingram in Q2, with sales growing two per cent year on year. This represents the 10th quarter in a row of annual top-line growth in the region.

Latin America also showed well, with dollar revenue up 14 per cent, despite growth being trimmed to the tune of 13 points by the softness of local currencies.

It was a similar story in the Asia-Pacific region, with a reported sales spike of four per cent, but constant currency growth pegged five points higher.

Europe was perhaps the worst-affected region, with dollar turnover falling seven per cent, despite Ingram claiming that "demand was solid in local currencies". The distributor indicated that the UK and Germany posted double-digit growth during the quarter.

Worldwide sales across the first half of 2012, which ended on June 30, remained flat at $17.4bn. The company expects Q3 sales to be sequentially flat, with gross margins coming under continuing pressure.

Ingram chief executive Alain Monie said: "We had another solid quarter, with strong sales in many countries, particularly relative to overall IT spending.

"We are executing on our strategic initiatives. We continue to invest organically in the business across all regions to fuel future accelerated growth in higher-margin markets and the business is absorbing these investments while still generating solid operating margins.

"We are also delivering on our M&A strategy to accelerate our presence in high-growth and higher-value markets."