Record year for Arrow as China weakens

Record year for Arrow as China weakens

Business news |
By Nick Flaherty

Distributor Arrow Electronics has seen a record year but warns of softening demand in China as the chip shortage eases and the semiconductor downturn bites.

The company saw full year sales of $37.12bn, up 8% year on year (and up 11% on a constant currency basis). Net income for 2022 was $1.43bn, up 23% from $1.1bn in 2021.

“Demand for electronic components and associated design, engineering and supply chain services generally remained healthy in the Americas and Europe regions, but we experienced softer demand in Asia, particularly in China,” said Sean Kerins, Arrow’s president and chief executive officer (above).

Fourth quarter 2022 sales were $9.32bn, up 3 percent year over year, and 8 percent year over year on a constant currency basis. However Q4 profits were $349m, down 10% from $371m in Q4 2021.

The company is to some extent protected from the worst effects of the down turn with only 10% of its business in the PC market and a total of 220,000 customers to spread any effects in the component distribution business. The global enterprise software and hardware business is counter-cyclical to counter the component downturn.

“In 2022, we delivered the best financial results in the history of the company,” said Kerins. “Throughout the year, we continued to make investments to support our customer needs, and we continued to grow and generate strong shareholder returns in the process.”

“We continue to have confidence in the business and Arrow’s long-term growth potential.”

The global components distribution business saw fourth-quarter sales of $6.83bn, an increase of 2 percent year over year (6% on constant currency) with Europe growing 23% and the US 9%. Asia Pacific though fell by 13%. Operating profit grew 2.7% from $430m to $442m.

The enterprise computing solutions (ECS) hardware and software business is smaller with fourth-quarter sales of $2.50 billion reflected an increase of 7 percent year over year. Europe enterprise computing solutions fourth-quarter sales increased 11 percent year over year, with the Americas up 4 percent. Operating income was flat.

“Hardware supply constraints are easing, and demand remained strong for most of our key technology categories. We continue to see strength in cloud, IT-as-a-Service and enterprise software adoption, and we were pleased with the results of the business,” said Kerins.

For Q1 2023 he sees sales of $8.33 billion to $8.93 billion, with global components sales of $6.55 billion to $6.85 billion, and global enterprise computing solutions sales of $1.78 billion to $2.08 billion, all down on the last quarter.

“On a constant currency basis, our first-quarter guidance implies a sequential growth rate range of down 2 percent to 6 percent for global components and down 18 percent to 30 percent for global enterprise computing solutions, when compared to the fourth quarter of 2022,” said the company.

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