Avnet has reported Q3 sales of $5.31 billion, a year on year decline of 6%. The results were near the high end of Avent’s guidance, and aided by better than expected performances from Farnell and Asia/Pacific sales.
These gains were offset by expected ongoing weaknesses in the West with Europe presenting the most challenging market conditions.
Commented Phil Gallagher, Avnet CEO: “Semiconductor and IP and E lead times and pricing continue to be stable for most technologies. Our global book to bill ratio continues to improve with the Asia region achieving parity in the quarter and with The Americas and EMEA approaching parity. I would note that the IP and E book to bill ratio across the company continues to improve above parity. Our backlog continues to be lower due to a combination of shorter lead times and customers still in the destocking mode. Cancellations have remained at normal levels.”
Gallagher also pointed to customers continuing to work through elevated inventories.
At the top line, Avent’s Electronic Components sales declined 5.7% year on year to $4.95 billion due to the economic backdrop and certain geopolitical factors.
Asia was the only region with year on year sales growth.
“In EMEA, we continue to experience weak demand across the region. In the quarter, the industrial end market increased slightly, while other verticals were down sequentially. The aerospace and defence end market was the only vertical that showed growth on a year on year basis,” said Gallagher
In the Americas, Avnet saw sequential growth in the transportation and compute end markets, while other verticals were down sequentially. All verticals with the exception of Compute were down on a year on year basis.
“We did not see any meaningful increase in shipments in advance of the anticipated tariff increases,” added Gallagher.
Sales for Asia increased 13% year on year to $2.48 billion, representing the third consecutive quarter of year on year growth.
“Our demand creation wins increased as our field application engineers continue to find ways to create solutions for our customers even in these challenging markets,” said Gallagher. “One bright spot to mention is Abacus. Our specialty IP and E business in EMEA recorded solid increases in demand creation revenues and gross profit dollars.”
Turning to Farnell, Gallagher commented: “We are encouraged by the progress Farnell is making as sales increased 6% sequentially and operating income increased to 3% for the quarter. We continue to be challenged given the macro environment in Europe where a large portion of their sales are derived.
“While our team still has a lot of work to do, I expect that we will see steady improvements at Farnell. We will continue to execute against our strategy and focus on those growth opportunities we can control, including leveraging existing Avnet core customer and supplier relationships, thus our branding of the Power of One.”
Gallagher also addressed the impact of tariffs on customers and Avnet’s own financials.
“First, I will start by saying the current environment regarding tariffs is dynamic and our remarks today are based on what we know at this time. As we’ve mentioned before, when tariffs on goods originating from China went into the effect in 2018, we implemented changes to our systems and processes to minimise the impact of tariffs where we could and pass through tariffs to our customers as seamlessly as possible. In response to recently enacted tariffs earlier this month, our team has been making the necessary adjustments to our systems and processes to capture and mitigate the widening scope of those that are currently applicable.
“Some of our solutions to minimise the impact include leveraging our global logistics and services footprint, collaborating with suppliers so we can minimise impact on our customers and offering alternative country of origin products and solutions that are not subject to tariffs. To conclude, we are experiencing one of the most challenging uncertain times that I’ve witnessed in my forty plus years in distribution,” Gallagher explained. “Supply chains today are very complex. And as I like to say, complexity is our friend. At Avnet, our job and a big part of our value proposition is to minimise the complexity so our suppliers and customers can achieve their goals in the most cost effective way possible. We at Avnet have a long history of adapting to evolving technologies, market cycles, geopolitics and shifts in regulations. I’m confident we will weather these current challenges and emerge stronger.”
