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Ingram Micro sales slump 12 per cent worldwide in Q1 FY2016

Mike Gee | May 2, 2016
Muted spending on PCs, smartphones, serves and storage in January and February has seen Ingram Micro record a 12 per cent worldwide decrease in sales for Q1 FY 2016 compared with the same quarter in 2015.

Muted spending on PCs, smartphones, serves and storage in January and February has seen Ingram Micro record a 12 per cent worldwide decrease in sales for Q1 FY 2016 compared with the same quarter in 2015.

Asia-Pacific which includes Australia fared even worse with sales down 13.8 per cent from $US2.54m in Q1 FY2015 to $US2.19m for Q1 2016.

Global sales came in at $US9.3 million compared with $US10.6m for Q1 2015.

Ingram Micro CEO, Alain Monié, said, "We saw stabilisation of global IT demand in March, which has continued into April, however, IT spending was muted in the first two months of the year, particularly for high volume categories including PCs, smartphones, servers and storage.

"While we did not capture the full revenue and operating income opportunity available to us in the quarter, our focus on higher value business continues to show results as we delivered a 97 basis point increase in consolidated gross margin, buoyed by strong improvement across all regions.

"We have also increased the pace of some of our strategic investment as we focus on building and enhancing the global capabilities that will support our mid- and longer-term business objectives. We filed our preliminary proxy yesterday afternoon and our transaction to join HNA Group is on track to close in the second half of 2016."

First Quarter Results of Operations
The company reported the translation of foreign currencies versus last year had a negative impact of 3 percentage points on worldwide sales. Approximately $US200 million, or 2 per cent, of the reduction in 2016 first quarter worldwide sales was related to the company negotiating a favourable change in contract terms with some customers in Europe (as highlighted in the last quarter), which led to recognising these sales on a net basis versus a gross basis as the company did in the first quarter of last year.

Additionally, last year's first quarter benefited from approximately $US100 million, or 1 per cent, in North American mobility distribution business that the company elected to exit this year due to profitability levels that did not meet the company's objectives.

In a statement, Ingram Micro said the remaining sales decline of 6 per cent was primarily related to soft demand for high volume product categories, particularly in consumer markets, which was consistent with the broader overall IT market demand in the quarter. Significantly higher gross margin was the result of a focus on driving a better mix of higher value sales and solid returns on invested capital, as well as recent acquisitions.

Cash flow from operations for the 2016 first quarter significantly improved to $US275 million when compared to approximately $60 million last year. The company said this resulted from strong global execution on the company's working capital improvement program, which helped reduce working capital days at the end of the 2016 first quarter to 23 days, an 8-day improvement year-over-year.

 

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