Ingram Micro still haunted by freight charging


Ingram Micro still haunted by freight charging

Microscope contributor

Ingram Micro’s EMEA operation posted a $4.7m loss in the third quarter as it admitted the decision this summer to increase freight charges and walk away from unprofitable business took their toll in a weakening market.


Worldwide, the distributor saw sales for the three months ended 27 September 2008 decline 4% year-on-year to $8.28bn, including the positive impact of currency exchange rates that added around three percentage points to revenues.


Profits for the period fell 35% from $72.4m a year ago to $46.4m, but while the North American, Latin American and Asia Pacific businesses added to the bottom line, EMEA experienced a 116% decline in profits from the $29m made in the third quarter of 2007.


Greg Spierkel, Ingram CEO said, “Our proactive steps to walk away from unprofitable business and recover freight costs – combined with softening demand in our three largest regions – had a negative impact on worldwide sales growth.”


He asserted these actions had helped it to maintain a solid gross margin “and prepare for a stronger, more profitable future”. Gross margin declined by five basis points to 5.47%. Operating expenses were 4.59% of revenues compared to 4.23% a year ago.


The EMEA results included $3.1m spent in an expense-reduction programme but Ingram suggested its weaker performance in the region was also connected to a drop in volumes and therefore vendor rebates, more competitive pricing and op-ex that do not fit the leaner sales outlook.


Spierkel pointed out that cash in the bank amounted to $807m, outweighing debts by $349m. Inventory was worth $2.53bn, or 29 days of stock compared to 27 in the third quarter 2007.


A strong balance sheet is a boon to hold onto in these current choppy waters and Spierkel warned he did not expect the climate to improve anytime soon.


“We believe that the softer global economy will continue well into next year, which will dampen the demand for technology products and services.”


He continued, “We will continue to pursue optimisation actions that will create a stronger, more agile company for the future, but these efforts may have a negative impact on sales in the near term.”


As a result of the “current unpredictability of the global markets”, Ingram has decided to discontinue the filing of financial quarterly updates.

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