Northamber has given a clear insight into life for a distributor in the current economic climate with overstocking and falls in average selling prices making life difficult.
An interim management statement revealed that although sales had improved by 9% in fiscal Q1 compared to the Q4 sales to 30 June the impact of reduced demand and over supply hit gross profit margins taking them down to 6.5% for the three months ended September compared to 7% for last year.
"Consequential oversupply and commensurate vendor destocking actions adversely affected our overall margins," declared the interim statement.
"The combination of de-positioning the empty-revenue portion of our volume portfolio offerings and the wider economic downturn resulted in a 29% reduction in total sales in Q1 to 30 September 2011 of this financial year compared with Q1 last year," the statement added.
As a result the distributor continues to operate a strict cost control programme which because of the ongoing economic conditions is now "at the forefront of our attentions".
In a sobering assessment of the future prospects for distribution Northamber stated that the current conditions were unlikely to improve quickly, although it was hoping the overstocking issues and consequential impact on pricing would correct themselves soon.
"For the present, there is no clear indication of any early improvement in the industry outlook. Hopefully when the overstocking situation is resolved there may be a return to a more rational balance of product and pricing. In the meantime we can only continue to operate as efficiently and effectively as we can," the firm added.