This article is more than 1 year old

Mega-distie Ingram Micro takes knife to costs in 'very challenged' Europe

Q3 sales in region flat like a pancake, operating profit tumbles

Flatlining sales growth in Europe has led the world's largest distributor, Ingram Micro, to restart a cost-slashing exercise in the region after describing the operation as "still very challenged".

It also plans to roll out newer tech services to resellers on this side of the Atlantic, which compared to the US has been underdeveloped.

The world's largest tech distributor last night rolled out calendar Q3 results that showed a 12 per cent year-on-year sales hike to $10.2bn which was largely attributable to several acquisitions and some ground gained in North America.

Operating expenses soared, on the back of the buys of Brightpoint and Aptec Holdings, with S,G&A up to $442.7m from $353.4m a year ago, as reorganisation costs rose to $11.6m versus $2.5m.

Despite these factors, acquisition-based sales growth helped drive operating profit up to $138m from $93m, an operating margin of 1.36 per cent. Net profit was $79m from $62m in Q3 2012.

The picture closer to home was less rosy for Ingram management - as turnover remained static compared to a year ago at £2.42bn, while operating income crashed to $4.9m from $14.5m.

Chief abacus-stroker Bill Humes said on a conference call with analysts: "The team did a good job maintaining pricing discipline and successfully implemented profit improvement programmes in some countries, but we're not satisfied with this performance and have begun to implement specific cost-saving initiatives in the region".

Earlier this week, El Chan revealed that following an exec reshuffle, long-serving exec Johan Vandenbussche, who was veep for the UK and Benelux, has left, as has Italy operational head Vincenzo Baggio.

Newly installed president and COO Paul Read described its European business as "still very challenged ... but we are working on adjusting the cost structure to fit this environment so we can get greater return, where the profitability today is certainly not acceptable."

He said the company also needs to make more use of its go-to-market tools and resources: "We've addressed the management structure, and we have some under-performing assets that we are focusing on. All of this will be ongoing through 2014."

Read said it was building "platforms", aping the model operated in the US where Ingram pushes various types of services to smaller and medium sized channel customers.

"You've seen in North America over the last couple of years, we made investments to address these services businesses, and it's paying off. The margins are pretty good, and they're doing very well in a low growth environment. So Europe has to move to that model, there is some work to be done there but I think we'll be well on our way next year".

CFO Humes said top line expansion at group level was "mainly due to our 2012 fourth quarter acquisitions of Brightpoint and Aptec" though he said the US and Canadian operations contributed some "modest growth" too.

Sales in North America edged up two per cent $4.06bn versus $3.97bn a year earlier. Operating income came in at $97.7m up from $66.9m.

"We were strategic in managing growth and pricing in various segments [in North America]. Revenue growth was driven by advanced solutions, with particular strength in storage and infrastructure systems," said Humes.

Brightpoint, acquired for $850m last year, generated revenues of $1.06bn and an operating profit of $10.7m during the quarter.

Ingram wrapped up the deal for the mobile distie specialist last October, and the last standalone results for Brightpoint showed sales of $1.27bn for its calendar Q2 2012, which means the business has gone backwards, at least in this Q. Aptec was turning over $250m a year when it was bought last year.

The integration of Brightpoint continues and should be completed next year, execs said.

Ingram sales dipped one per cent in Asia Pacific to $2.15bn and operating profit was up $22.4m from $9.2m as the losses in the Australian arm narrowed. Latin America was down nearly four per cent to $448.6m and operating profit was $9.6m versus $9.3m. ®

More about

More about

More about

TIP US OFF

Send us news


Other stories you might like