Tough economy hurts Avnet’s sales

Distributor reports 9% drop in fiscal fourth-quarter sales, 3% decline for the year

Avnet, Inc. reported lower sales and earnings for its fiscal fourth quarter and year ended June 30, 2012, citing global economic and supply chain challenges that began early in the fiscal year.

The electronic components and technology solutions company reported $25.7 billion in revenue for the year, down 3% compared to fiscal 2011. Fourth-quarter sales fell 9% to $6.3 billion. Earnings fell as well, declining 6% to $4.06 per share for the year and declining 19% for the quarter, to 99 cents a share.

Avnet’s CEO Rick Hamada pointed to the inventory correction in the electronic components supply chain in the second half of 2011 followed by slowing economic conditions in the early part of this year as key reasons for the results. He also said Avnet performed well despite the challenges, generating $958 million of adjusted operating income and $529 million of cash flow from operations in the fiscal year. The company also invested $320 million in its stock repurchase program and another $313 million in mergers and acquisitions that strengthened its position in key markets. Avnet finalized the acquisition of 11 companies in fiscal 2012.

Fourth-quarter revenue fell 5% year-over-year at Avnet Electronics Marketing, the company’s electronic components division, to $3.76 billion. Sequential revenue growth of 0.2% was at the low end of normal seasonality, the company said, with all three global regions coming in below expectations. Global book-to-bill dropped below one-to-one for the fourth quarter, with the drop occurring in June after trending above one-to-one for the most part of the March quarter through April and May. Inventory fell by 4% after adjusting for acquisitions and currency.

Avnet’s Technology Solutions (TS) group faced similar challenges, as a weaker-than-expected June yielded sequential revenue growth below normal seasonality. Sales fell 14% for the quarter to $2.54 billion.

Looking ahead, Avnet said it expects fiscal first-quarter 2013 sales between $3.55 billion and $3.85 billion in its Electronics Marketing business and between $2.25 billion and $2.55 billion in its Technology Solutions business.

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