EMEA Leads The Way In Avnet Q4

Take a bow Avnet’s EMEA electronic components distribution unit. The region continued its strong showing in Avnet’s Q4 delivering 9.7% sales growth on constant currency. The Asia/Pacific business chipped in with a handy 7.4% sales uptick with the Americas 1.8% increase condemned it to the Lanterne Rouge*.
Sales increased 7.2% in constant currencies and reported sales were flat at $4.31bn. Income slipped a smidgeon to $205m versus $207m in Q4 2014. The company says that the EMEA region’s improvement was offset by a regional mix shift to the lower margin Asia region.
In an analysts phone in, Gerry Fay, President of Avnet EM commented, “I would say, if you look at the drivers of what’s growing our business in Europe, I think automotive and industrial continue to be strong there. I think a lot of that has to do with the FX rates. So I think the weak euro is helping exports, particularly in some of the markets with a strong influx of Germany. So based on what we see from a growth perspective and normal seasonality in Europe, I don’t see any big changes on horizon at this point.”
Avnet’s total Q4 reported sales including its Technology Solutions computer distribution business were $6.80bn, up 3.1% in constant currency but down 3.6% due to the strengthening dollar against the Euro. Income was $159.5m.
Avnet’s full year revenues were $27.9bn, a 5.4% increase in constant currency. Operating income was up 11% to $972.5m.
Rick Hamada, Chief Executive Officer, commented, “Despite the significant strengthening of the US Dollar throughout fiscal 2015, the Avnet team delivered consistent improvement in our financial performance as revenue grew year over year and adjusted operating income margin expanded in all four quarters. As a result, reported revenue of $27.9 billion represented a 5.4% year-over-year increase in constant currency and adjusted operating income grew 11.0% in constant currency to $972.5 million. The improvement in profitability was led by our EMEA region where both operating groups grew operating income double digits and operating income margin increased by greater than 50 basis points despite the currency headwinds that negatively impacted our reported results.”
“Similar to the March quarter, our results were negatively impacted by the strong dollar as organic revenue growth of 3.1% year over year in constant currency translated into a 3.6% decline as reported. High single digit organic growth in our Electronics Marketing (EM) business in our EMEA and Asia regions was offset by a decline in our computing components business at Technology Solutions (TS),” Hamada added. “ Our reported earnings were also negatively impacted by a stronger dollar as a 10.0% year-over-year growth in our adjusted operating income in local currencies was reduced to a 0.4% decrease. Even though currency had a negative impact on our reported results, our team executed well and generated leverage on organic growth. If you exclude the impact of changes in foreign currency exchange rates, in the June quarter we grew operating income 3.3 times faster than revenue.”
“EM closed out the year with another strong quarter as high single digit organic growth in our EMEA and Asia regions drove total revenue up over 7% year over year in constant currency. EM EMEA delivered another quarter of strong leverage as operating income in local currencies grew 3.1 times faster than revenue for both the fourth quarter and full fiscal year, “ Hamada continued.
“ At EM Asia, where double digit growth in fiscal 2015 was driven by high volume supply chain engagements, return on working capital increased 82 basis points and economic profit grew 2.3 times faster than revenue. In our Americas region, which has been dealing with a sluggish growth environment all year, fiscal 2015 revenue grew 1.6% year over year and operating income margin was consistent with the prior year. These strong organic results were significantly reduced at the EM global level on a reported basis due to the stronger dollar. EM’s operating income decreased 0.5% year over year in reported dollars in the fourth fiscal quarter but increased 6.6% for the full fiscal year.”