Avnet has reported Q3 sales of $4.9 billion, up 4.8% from $4.7 billion sequentially and compared to $4.3 billion in the prior year quarter, a rise of 10.7%. Sales exceeded guidance, driven by broad end-market strength.
“In the third quarter, the impact of our back-to-basics strategy resulted in strong execution and performance across all regions,” said Avnet Chief Executive Officer Phil Gallagher (pictured). “As we continue to navigate supply constraints, extended lead times and a shifting operating environment, our deep relationships with our partners and tight management of our backlog will continue to be of utmost importance. Our prioritisation of these relationships and focus on execution to date have put Avnet on a more linear growth path. Further, our ability to enhance value through demand creation for our partners has continued to contribute to our success at the centre of the technology supply chain. We remain confident in our ability to execute and create value for our customers and suppliers.”
He continued, “As we highlighted in our second fiscal quarter, we saw notable demand increases across the automotive, consumer and industrial segments. Those end markets, in addition to communications and computing, drove end market demand throughout the third quarter. Customers are seeking to reduce supply chain risks by securing longer term supply agreements and exploring second sources, providing welcome opportunities that we were not previously seeing. On top of that, many suppliers are also experiencing raw material price increases for items such as resins, coppers and more. Avnet that is in most cases able to pass along these price increases to our customers. While this type of operating environment is not ideal, we certainly navigated similar circumstances throughout our 100-year history and have a number of systems and processes in place that enable us to effectively serve our customers and suppliers.”
Gallagher told analysts that Farnell revenues were up year over year and sequentially in the quarter at $396 million and operating margin increased sequentially to 6%, progressing towards our target of 10%.
“We made the conscious decision this quarter to continue to maintain operations at both the new Leeds distribution centre and the existing facility for the foreseeable future,” Gallagher continued.
“This decision is in line with our commitment to provide seamless service to our customers as we continue to see increased demand out of Farnell. We remain steadfast in our commitment to continue to invest in this critical aspect of Avnet and are excited about the clear potential of Farnell as we further digitise our business. Farnell saw e-commerce sales up 20% year over year. We are bullish about the contributions Farnell can make to Avnet value proposition and continue to invest in Farnell. We added 67,000 SKUs through the first nine months of fiscal year 2021 and are progressing on our plans to add up to 250,000 SKUs through the fiscal year 2022.”
In Avnet’s core electronic components business, revenues were up year over year and sequentially in the quarter at $4.5 billion.
There was strong continued growth in Asia, and better than expected results in Americas and continued incremental improvement in Europe, Avnet’s strongest region.
Lead times lengthened throughout the quarter, driving very high book to bill ratios in every region.
Said Gallagher, “We are continuing to tightly manage our backlog and our teams are working closely with our customers to gain extended visibility, which we are then sharing with our supplier partners. While it is difficult to forecast how long the supply constrains will continue, most market participants expected to extend through at least the second half of calendar year 2021.”