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Ingram Micro plans EMEA restructuring

by Stuart Wilson, Friday 25 April 2008

Global distribution behemoth Ingram Micro is planning to restructure its EMEA operations, with a focus on the regional headquarters. The announcement came as Ingram reported first quarter 2008 worldwide sales of US$8.58 billion – a 4% year-on-year rise. After-tax profits hit US$64.1m – a margin of just 0.75%.

EMEA sales hit US$3.07 billion for the first quarter of 2008 – 36% of Ingram’s total sales. This represented a 1% year-on-year rise in EMEA sales, but the strength of European currencies against the dollar transformed this into an 11% year-on-year positive impact.

“We’re pleased with the performance of our Asia-Pacific and Latin America regions, both of which grew at double-digit rates with good operating leverage,” said Greg Spierkel, CEO at Ingram Micro. “However, as we discussed in February, softness in the economic environments in North America and Europe is exerting pressure on our operations in those regions.”

“We’ve made good progress on the expense-containment plan instituted earlier this year, but additional steps are necessary in this environment,” Spierkel added. “We are planning a restructuring in our EMEA operations, primarily in the regional headquarters, and made targeted reductions of office-based positions in North America earlier this month. We’re confident that the actions will improve productivity and operational effectiveness without sacrificing customer service or vendor relationships, or inhibiting profitable growth.”

The proposed changes are expected to cost between US$11m and US$13m, but result in annualised savings of up to US$24m. During the first quarter, operating profits in EMEA were US$26.8m, down from US$35m a year earlier.

William D. Humes, executive VP and CFO at Ingram Micro, said: "Despite the challenging economic environment, gross margins were at the highest first-quarter level in 10 years. This is a direct result of our commitment to strategic initiatives that improve the margin profile and continued focus on our most profitable lines of business.”

“Other bright spots included strong performances in many of our emerging markets. We are clearly focused on opportunities to reduce operating expenses and inventory levels. While it’s difficult to make rapid adjustments in these areas when demand slows, we have improvement plans in place and I expect to see good progress going forward,” Humes continued.

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