2020 Predictions: What Manufacturers Need to Know
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The Avnet Inc. that just closed fiscal 2017 is significantly different from the Avnet of a year ago. Following a rollercoaster ride of M&A, executive turnover and internal-systems challenges, Avnet ended Q4 with sales up 16.1 percent year-over-year. Driven by organic growth of 8.4 percent, Avnet’s Q4 revenue reached of $4.6 billion from $3.9 billion a year ago.
The company’s decision to exclusively focus on electronics components and services has so far paid off. Components sales grew across all major regions during Q4, with EMEA increasing 32 percent in constant currency and organic revenue up 17 percent, according to Bill Amelio, CEO of Avnet. For the fiscal year ended in June, Avnet’s sales of $17.4 billion were up 4.2 percent year over year and 5.1 percent in constant currency.
With the sale of its Technology Solutions business and its acquisition of Premier Farnell, Avnet changed its reportable segments to the Electronic Components and Premier Farnell operating groups in Q4. Electronic Components sales increased 8.8 percent from the year ago quarter in constant currency while Premier Farnell organic sales increased 4.0 percent year over year.
“Our digital initiatives continue to gain traction as Premier Farnell’s Element 14 community surpassed 500 thousand members and we continue to add over 30 thousand new digital customers each month,” Amelio said. “We are seeing meaningful improvement in demand creation metrics as we redeploy field application engineers to new products and suppliers that value the reach and technical breadth we bring to high growth markets. With our digital ecosystem growing steadily and as we realize the positive impacts from our transformation initiatives, we enter fiscal 2018 positioned to drive further organic growth and improve financial performance.”
Like its nearest competitor Arrow Electronics Inc., Avnet is benefiting from extended component lead times and firmer pricing. Premier Farnell’s EMEA organic sales increased 5.8 percent year over year in constant currency and Premier Farnell Asia’s organic sales increased 13 percent from the year ago quarter in constant currency. Electronic Components operating income margin in the Asia region improved 25 bps sequentially and 45 bps from the year ago quarter.
Executives noted they still have an uphill climb. The loss of several key suppliers is impacting results as are ongoing investments in IT. Phil Gallagher, recently named president of Avnet Electronic Components, said he’s optimistic about Avnet’s relationships with existing suppliers. "As we sit right now, I'd say we have solid relationships with our suppliers," he said.
Avnet also announced that CFO Kevin Moriarty will be leaving the company and has named Ken Jacobson, the company’s controller, as interim CFO.
“Kevin has contributed to Avnet’s strategy and direction in immeasurable ways,” said Amelio. “Kevin leaves a tremendous legacy at Avnet—having completely reprioritized our portfolio with the sale of our Technology Solutions business to Tech Data Corporation and the critical acquisitions of Premier Farnell and Hackster.IO. Kevin was instrumental in our capital allocation program including overseeing a number of acquisitions, instituting a dividend and managing our disciplined share repurchase program. Avnet is on sound financial footing with a differentiated strategy for growth due in large part to Kevin’s leadership and vision.”
Avnet’s outlook for Q1 2018 calls for sales in the range of $4.15 billion to $4.45 billion, which reflects the net impact from supplier channel consolidation. Excluding the impact of supplier channel consolidation, the midpoint of guidance would be at the low end of the company’s seasonal range.
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