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Tech Data still feeling the burn from Brazilian shave

Country exit keeps hitting sales, but profit creeps up

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Tech Data Corporation, the IT distie giant and parent of Computer 2000 and Azlan in the UK, has seen net income rise to $51.7m in the first quarter of the year, despite a fall in revenue.

The firm's total revenue dropped 6.9 per cent to $5.9bn, missing the Zacks Investment Research consensus estimate of $6.18bn.

Tech Data's net income was 6 per cent higher than the same period of last year, but operating margin had widened to 1.37 per cent from 1.2 per cent.

"We are pleased to report a solid start to fiscal 2013 with record first quarter operating income, net income and earnings per share," Robert Dutkowsky, CEO of Tech Data, said in a canned statement.

The company said that a number of one-off issues had stopped its profits being higher, including changes in vendor warranty services and certain fulfilment contracts in the US as well as Tech Data's exit from Brazil and Colombia, which happened at the end of fiscal 2012.

The same warranty services and contracts were blamed for lower sales in Europe. Tech Data said that if you didn't count these issues, net sales worldwide would have been up 1 per cent, but instead they were down 7 per cent.

The results were mixed as Tech Data tries to take what it terms a "selective approach to capturing profitable market share". Consumer appetite for PCs is being squeezed in the global economic climate, as is the firm's cash with the volatile exchange rates, and the floods in Thailand aren't going to do the company any favours either.

Tech Data said the altered vendor warranty services, the pull-out from Brazil and Colombia and fulfilment contracts, as well as the "general market conditions" would continue to affect sales and income for the rest of the fiscal year. However, the distie is forecasting an operating margin of 1.55 per cent for the whole year. ®

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