Distribution results reveal profit pressures

Distribution outfits Asbis and Logicom have both recorded net profits for the first half of the year, but the level of their earnings reiterates the exhausting task that IT wholesalers face to make their endeavours financially worthwhile.

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By  Andrew Seymour Published  August 29, 2007

Distribution outfits Asbis and Logicom have both recorded net profits for the first half of the year, but the level of their earnings reiterates the exhausting task that IT wholesalers face to make their endeavours financially worthwhile.

Components specialist Asbis, which typically harvests around 10% of its business from the Middle East, registered a net profit of $3.1m for the opening six months of 2007, representing a 27% increase on the corresponding period the year before. However, that return works out at less than 1% of the $540m it generated in sales over the same period, underscoring the ferociously competitive nature of the components channel.

Exploiting economies of scale and product volume clearly remains a key factor for Asbis, which boasts subsidiaries throughout Eastern Europe, CIS and the Middle East. "We are pleased to report these results and have further progressed our strategy of developing our distribution business alongside our own-brand Canyon and Prestigio products," said Siarhei Kostevitch, chief executive at Asbis. "We announced [in July] that the company is contemplating a fund raising and listing on the Warsaw Stock Exchange in the fourth quarter of 2007. The company continues towards this target and will make further announcements as appropriate."

Asbis remains on course to top the $1 billion mark this year, reaffirming its position as one of the most dominant components and peripherals suppliers in the EMEA region. The company also revealed that it strengthened its balance sheet position during the first half of the year, leaving cash and equivalents totalling $15m.

Meanwhile, networking and software focused Logicom, which has offices in the Middle East and Southern Europe, boosted group sales by 17% to $183m during the first half of 2007, largely as a result of its achievements in markets such as Greece, Italy and Turkey. However, its $4.6m net profit comprised just 2.5% of sales, even though it climbed 7% on the previous year. Gross profit margin slipped from 7.7% to 7.4% year-on-year due largely to the increase in sales from distribution, rather than its software and solutions activities.

Recent market reports say the distributor believes the results are "satisfactory", adding that its next set of financial results covering the nine-month period will also show an improvement on the previous year.

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