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Channel credit situation still a concern - Asbis

Distributor admits that credit risk has emerged as one of the biggest threats to its health

Distributors remain wary of their exposure to financial liquidity risks from customers failing to meet payments.
Distributors remain wary of their exposure to financial liquidity risks from customers failing to meet payments.

PC and components distributor Asbis has revealed that its financial performance remains highly susceptible to credit risks as a result of the havoc wreaked on the market by the economic downturn.

The Cyprus-listed outfit last week published its 2009 annual report in which it made it clear to shareholders that credit risks could have a material adverse effect on its business.

"Due to the recent market developments following the credit crisis that affected all countries the Group operates in, credit risk has become one of the most important factors that might affect the Group's results in the future," admitted the company.

Asbis said that although it had managed to insure a large portion of its receivables, credit insurance providers had become more risk averse and were cancelling or withdrawing credit limits to customers.

"As a result, the Group is exposed to more credit risk and the ability of the Group to analyse and assess its credit risk is of extremely high importance," it warned.

Asbis has secured credit insurance from Atradius and Euler Hermes, which covers 50% of its revenue in the event that it is unable to recover payments from a customer. It generally provides credit to resellers on terms ranging from 21 to 60 days, although in a few cases it offers 90-day terms.

The distributor posted a net loss of US$2.9m last year compared with a profit of US$4.1m the year before. Sales fell 22% to US$1.16 billion over the same period, with the Middle East (now worth 15% of its turnover) ending the year as the only geography to register any growth.