Avnet Q4 revenues slipped 15% to £5.56 billion year on year. Full year revenues came in at $23.8 billion.
President and CEO Philip Gallagher commented: “Looking back on fiscal year ’24, we began the year with great momentum from fiscal year ’23, which was a record year both for revenues and earnings per share. As 2024 progressed, we faced a softening demand environment, and I want to thank our team for their execution and perseverance in these challenging market conditions. Their continued efforts will allow us to emerge from the crisis stronger as the market recovers.”
The Q4 revenues exceeded Avnet’s top line and earnings per share guidance. Margins topped 4% for the tenth consecutive quarter.
“On a year-on-year basis, aerospace and defence was the only end market with increased demand globally,” Gallagher explained. “Semiconductor lead times have continued to decrease and remain relatively low for most technologies. And as I mentioned last quarter, the growth in data centre build outs surrounding Cloud and artificial intelligence is driving longer lead times for certain products, and we would expect this to continue.”
Turning to IP&E, Gallagher continued: “Lead times are generally stable and have returned to what I would characterize as a normal range. And we are seeing increasing demand for some interconnect products and capacitors for certain applications. Our global book-to-bill ratio improved modestly over the last quarter, led by our Asia and Americas regions, both finishing the quarter approaching parity. Our EMEA business, which has a large portion of its business driven by the industrial and transportation end markets, is seeing softer bookings and billings due to lower demand.”
Avnet’s backlog is lower as a result of shorter lead times and customers working through their inventory on hand. Cancellations have remained at normal levels.”
Q4 in the geographic regions delivered a mixed bag.
In EMEA, demand in the aerospace and defence end market increased sequentially and year-on-year as military budgets have increased across Europe.
In the Americas, demand increased sequentially for aerospace and defence, and industrial end markets; and aerospace and defence was strongest on a year-on-year basis.
Gallagher was encouraged by promising signs in the Asia region.
“I mentioned on our last earnings call, we were seeing signs of a bottoming in our Asia region, giving us reasons to be optimistic that the market correction may be nearing its final phase in Asia. So it is notable that our Asia revenues increased sequentially as demand in the industrial, transportation and consumer end markets all increased with transportation showing the best growth on a year-on-year basis. We expect to return to overall year-on-year growth in Asia in either the September or December quarter.”
Turning to demand creation Gallagher said that Avnet’s engineering teams continued to engage with our customers and suppliers on design wins and registrations. This drove increases in revenues on a sequential basis and validates the value proposition we can deliver in any type of market.
Farnell was hit by the market softness, and the fourth quarter sales were down 16% year on year to $375 million. Lower demand for semiconductors was a key factor.
Said Gallagher: “We continue to expect Farnell’s high service offerings to enhance the synergistic collaboration between Farnell and Avnet. The combination allows us to serve our customers from new product introduction to mass production as one Avnet. Avnet is positioned as one of the only broadline global distributors that also has a global high-service distribution business.”
He continued: “As a key player in the global technology supply chain, we continue to leverage our value proposition in other areas, such as demand creation, IP&E, and embedded computing. I’ve already mentioned our demand creation and engineering capabilities. IP&E continues to be a key focus for our team, and in Q4, we saw a nice increase in this area, particularly in Asia, much of which is related to the build-out of data centres.
Gallagher also emphasised the focus on driving value through embedded solutions offerings.
“OEMs are increasingly looking to move from chip-down manufacturing to using modular compute solutions into their products. Because of this trend, we recently announced the launch of the Tria brand for our business unit that’s designed to manufacture embedded compute modules and systems. The new distinct brand will improve our ability to compete with other stand-alone brands in the embedded solutions business.”
Gallagher continues to feel optimistic about the long-term trends and the demand for technology and the pervasiveness of electronics.
He indicated opportunities driven by AI adoption as companies explore innovative ways to leverage its capabilities in both the data centre and ultimately, edge computing applications.
“We are participating in the AI growth trends through sales of components into data centres as well as providing supply chain services surrounding the data centre. This participation is expected to grow over the next several quarters and should positively impact sales across several verticals. I’m excited that Avnet’s position at the centre of the technology supply chain will allow us to continue to deliver increasing value to our customers and supplier partners.”
Concluded Gallagher: “As we enter fiscal year ’25, the prevailing belief is that the market correction seems to be in its last stages. Our Asia region appears to have bottomed, and we’re awaiting signs for a similar bottoming or inflection point to manifest in the Americas and Europe. Until then, we will continue to navigate through this market and control what we can control in anticipation of a brighter demand environment in the quarters to come.”
