Ingram Australia’s ERP transition dampens global Q1 results

Ingram Australia’s ERP transition dampens global Q1 results

Operating income drops $US21 million in Australia

Ingram Micro’s global first quarter of 2011 financial results has been impacted by the SAP ERP upgrade that took place in its Australian operations in January.

Operating income in Australia experienced $US21 million decline compared to the previous year. In Asia-Pacific operating income amounted to $US8.2 million, at the same time last year it was $US26.5 million.

Net income dropped $US56.3 million compared to $US70.3 million in Q1 2010.

In its financial statement, Ingram said the year-over-year decline was primarily attributed to the difficulties in transitioning to the new ERP system in Australia.

“We’re diligently addressing these issues to drive improved profitability and performance as soon as possible,” Ingram Micro CEO, Greg Spierkel, said in a statement.

“We are confident the future benefits of the new system outweigh some of the hurdles we’re facing today.”

The distributor also experienced a decline in gross margin down 24 basis points to 5.21 per cent, which was also partly attributed to operational disruptions it experienced during the transition to the SAP system.

Other factors that also contributed towards this included competitive pricing in certain Asian markets, softer retail demand in Europe, and a greater mix of lower margin geographies due to accelerated growth in emerging markets such as China and India.

Worldwide operating income dipped to $US100.1 million representing 1.15 per cent of total sales. Last year, it achieved $US105.7 million (1.31 per cent of total sales).

Despite this, Ingram experienced a record in Q1 worldwide sales, which reached $US8.72 billion, an eight per cent increase.

“Our performance in the quarter was mixed,” Ingram senior vice-president and CFO, William Humes, said. “The system transition issues in Australia, however, dampened what would have otherwise been a solid income performance.”

Spierkel said that it was continuing to see progress in Australia, but expects the remaining transition issues to impact on its second quarter results.

"As we look beyond the second quarter, we expect global demand to be relatively solid for the foreseeable future," he said. "We believe we have the right strategy to drive performance in our business, with a good balance of operational excellence, expansion into adjacent markets and development of new capabilities that give us a first-mover advantage.

"Our transition to a new enterprise system is critical to this strategy. Once the implementation is complete in approximately three years, the new system will bring us greater automation and efficiencies, enhanced service for our customers and partners, better decision making through richer and quicker data, and a consistent platform required to better operate as a truly global organisation."

Ingram Micro Australia marketing director, Grant Cleary, said it remains focused on improving customer service and experience.

In January, Ingram Australia went live with its new ERP SAP-based system and changes to its TechLink e-commerce portal.

Two months later, it is continuing to tweak the issues it is experiencing with its SAP system and TechLink portal.

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Tags retailIngram MicroSAP ERP upgradesystem transition upgrades


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