EMEA components boom shores up Avnet in Q3

Distie still on track for year of solid growth despite quarter of organic declines and a muted performance in its solutions arm

A booming quarter for its EMEA components business helped Avnet post impressive Q3 numbers, despite falling sales in its value-centric Technology Solutions unit.

For the three months to 29 March, the distribution giant's global revenue rose 6.1 per cent annually to almost $6.7bn (£4bn), with adjusted operating income up 9.9 per cent to $223.8m.

The sole driver of organic growth was its components-focused Electronics Marketing (EM) business in the EMEA region, where reported sales grew 26 per cent to just under $1.4bn. Organic top line growth was pegged at 13.3 per cent, while worldwide reported sales spiked 8.8 per cent to more than $4.1bn.

In its enterprise IT Technology Solutions (TS) business, Avnet saw reported turnover increase two per cent year on year to $2.55bn. But organic sales were down in both the Americas and EMEA, to the tune of 2.9 and 1.1 per cent, respectively.

For its final fiscal quarter, which closes on 28 June, Avnet is forecasting total revenue of between $6.6bn and $7.2bn. The EM unit is forecast to chip in somewhere in the region of $4.05bn to $4.35bn, with TS supplying $2.55bn to $2.85bn. Earnings per share are projected to come in at $1.04 to $1.14.

Even if Q4 sales are at the low end of its forecast, the distributor will still end the year with turnover more than six per cent up on FY13.

Chief executive Rick Hamada (pictured below right) admitted that its solutions business had fallen short of projections in Q3, but saw reasons to be cheerful in its bottom-line performance.

"Despite coming off a stronger than expected Q2 performance, our TS results did not meet our original expectations primarily due to a weaker-than-expected close to the quarter in our Americas region, and somewhat softer demand experienced by our computing components business in EMEA," he said.

"The revenue shortfall in our higher-margin Americas region strongly influenced overall TS profitability as operating income dollars and margins at the global level declined 11.3 per cent and 35 basis points year over year, respectively. We are, however, encouraged by our performance in EMEA this quarter as their ongoing portfolio management and resource allocation actions resulted in a 65-basis-points increase in operating margin year over year. We will continue to monitor our current market conditions carefully and adjust our resources as necessary to resume progress toward our long-term goals."