RECORD SALES AHEAD OF DOWNTURN

RECORD SALES AHEAD OF DOWNTURN



Electronic component distributors will be among the brightest stars of the high-tech world during this reporting season with sales and profits expected to barrel through estimates on a spike in demand for their services over the last year. A review of analysts’ forecasts confirms publicly traded distributors will individually report double-digit revenue increases for the second quarter and even the entire year. Get more news about Best Electronic Component Distributor,you can vist our website!

Distributors typically perform well during times of high growth and supply shortages as harried OEMs desperate to keep manufacturing plants humming buy up available inventories or commit to premium prepaid supply agreements. Inventories acquired by distributors ahead of explosive growth are often sold at higher prices, buoying sales as well as margins. That has been the case thus far for all component distributors with specialty distributors benefitting even more as OEMs scrounged around for components headed into key economic sectors like automotive, IoT, data and networking equipment, according to industry executives.

“Our experience and expertise allowed us to identify supply chain issues in the market early, hence, the investments we made in inventory during the course of the year,” said David Egan, CFO at RS Group, while presenting the company’s fiscal 2022 results. “Working closely with our suppliers to secure and invest appropriately in greater levels of inventory provided strength in availability and drove performance of the top line.”

In May, the specialty distributor reported revenue surged 28 per cent in the fiscal year ended March and noted in an update early in July that sales remained strong in the June quarter although they were trending down amidst changes in the “macroeconomic environment and increasing inflationary pressures,” according to CEO Lindsley Ruth, in a statement.

“Given our strength in the first quarter, we now expect our full year revenue and profit to be slightly ahead of current consensus estimates. Like-for-like revenue [grew] 18 per cent, despite significantly tougher comparatives,” Ruth said. “Gross margin improvements reflect an improved pricing and discount model and product management work.”
This is the storyline distribution executives will be parroting as they report June quarter results and through the rest of the year. The market is reportedly weakening but distribution will maintain its robust growth for a while longer. The industry segment tends to be the last to be impacted by industrywide slowdowns and, conversely, it is typically the last to experience the benefits of rapid expansion when the market starts to recover.

News from WPG Holdings, the largest electronic components distributor in Asia, reflect this trend. The Taiwanese distributor reported second quarter sales of $6.67 billion, (NT$199.06 billion) rising to the “high side of forecast.” Sales were about the same for the comparable 2021 quarter – NT$200.23 billion – pointing to a slowdown in the company’s growth pace that has not been reported by the broader market. In the 2021 second quarter, WPG Holdings’ sales grew 33.7 per cent from the second quarter of 2020, the company said.

The monthly sales figures from WPG Holdings give the impression of a weakening market (see chart) that is not fully supported by the performance of its peer in North America. The company’s year-over-year performance has swung from strong positive to mild and negative growth since the beginning of the year. The company’s zigzag financial results for 2022 so far may have a different underlying cause related to actions taken by China to curb the spread of Covid-19. Unlike North America-based Arrow and Avnet, its biggest competitors, WPG Holdings has a greater exposure to China, which earlier this year locked down Shanghai, a major center of electronics production. The result of the two-months long restriction on movements was a sharp slowdown in electronic output and this may have hurt WPG Holdings’ results.

As at the time of reporting Arrow and Avnet had not announced second quarter financial performance and both companies would not comment on their results. However, analysts have maintained positive forecasts for the two companies, although they are more bullish on Avnet. The Phoenix-based components distributor was projected to increase revenue by more than 20 per cent in the June quarter. The consensus analysts’ second quarter revenue estimate for the company was $6.3 billion, up 20.4 per cent, from $5.23 billion, in the 2021 comparable quarter. For Arrow, the analysts on average were expecting the company to post sales of $9.39 billion, up about 10 per cent, from $8.56 billion, in the year-ago quarter.