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Weak Q4 and full year blamed on vendor rebate problems

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Broadline distributor CHS Electronics will cut staff by 10 per cent and shut offices worldwide in a $15 million cost-cutting plan after posting a drop in profit in 1998. The US channel giant has outlined a huge overhaul to slash costs, including halting employee recruitment and trimming current staffing levels by about 600. It will also merge its 10 world regions into six operations and look at axing 25 to 30 redundant local warehouses. Q4 profit stood at $13 million on $2.9 billion turnover. This was compared to $23.8 million profit in the previous year, according to reports by Reuters. According to Peter Rigby, CHS director of marketing and communications, his will include merging the six UK warehouses into one building in Banbury, which was bought last month. CHS blamed overstated vendor rebates in the second, third and fourth quarters for the poor results. It was a similar story for the year-end results, with profit at $45.7 million, on turnover of $8.5 billion. This was against $48.4 million net income, in 1997. Rigby was unable to confirm how many, if any, jobs would be lost in the UK. He said: "A lot depends on how each of the companies are run and their profit. In a company like ours, there are always parts of it that perform and parts that don’t." He added that many of the jobs would go in "natural wastage" following the freeze on recruitment. CHS has 500 employees in the UK, and around 6,000 to 7,000 worldwide. Several top executive changes have been made recently. Pasquale Giordano, former executive VP of Europe, resigned following an investigation into the rebate discrepancies by an outside solicitor. This investigation also led to the restating of the second and third quarter’s results. He has been replaced by Jean-Pierre Robinot as CCO of Europe, who joined from Seagate. Senior executive Burt Emmer will oversee and take responsibility for vendor rebates. Chief executive Claudio Orsio will come out of his back-seat role of running CHS at a strategic level and resume direct responsibility for the overall business. The plan aims to reduce capital expenditures in 1999 by $15 million, cut operating expenses by $40 million and push up cash flow by $50 million. ®

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