Avnet Q3 Income Dives 41 Percent, Plans $40 Million in Cuts
Avnet (NYSE: AVT) plans some $40 million in cuts to after reporting a 41 percent nosedive in income and a 38 percent slide in per share earnings for its fiscal Q3 2013, bringing overall cost reductions in fiscal 2013 to about $140 million.
For the quarter, Avnet posted $6.3 billion in revenue, essentially flat from the same period last year, and net income of $86.2 million, a 41.6 percent tumble from the $147.6 million in recorded in the similar period last year.
Avnet’s Technology Solutions IT distribution arm rang up $2.5 billion in sales in Q3, slipping 0.9 percent from last year. ATS revenue in the Americas, at $1.3 billion, fell 5.1 percent year-over-year, while sales grew in EMEA and Asia. Overall, the distributor experienced gains in storage, services, networking and security but saw sales declines in servers and computing components, official said.
Sales for the quarter in Avnet’s Electronics Marketing unit also fell in the Americas, a 9.5 percent year-over-year decline to $1.3 billion.
Avnet blamed its performance for the quarter on seasonal fluctuations in demand, challenging economic conditions and, in particular, a back slide in higher margin business in the Americas. Its answer is to cut costs to improve operating margins, said Avnet CEO Rick Hamada.
“Our team delivered both top and bottom line results that met our expectations and were generally in line with normal seasonal patterns while we continue to navigate through an ongoing uneven economic recovery,” he said. “As a result, we are continuing to drive actions for margin improvement including new annualized cost reductions of approximately $40 million that are expected to be completed by the end of our fourth fiscal quarter. This will now bring our cumulative cost reductions in fiscal 2013 to approximately $140 million.”
Hamada cautioned that while Avnet intends to leverage the costs cuts to improve earnings, he could not say with certainty how fast the company will recover nor the exact course the recovery will take.
“While these cost reductions are designed to contribute to improving our operating income margins, the rate of improvement will depend on market trends going forward,” he said.