Ingram Australia seeks $150m equity injection from parent

By Andrew Birmingham on Feb 18, 2013 2:37 PM
Filed under Services

As losses continue.

The fallout of Ingram Micro Australia's well-known ERP problems continued well into 2012, dragging down the performance of the company's entire global operation as well as its local division.

The effect was felt most severely up until December 2011, according to financial reports filed with ASIC in December last year. But a financial analyst briefing in the US last week following its fourth-quarter 2012 results indicated Ingram’s local headaches continued deep into 2012.

The US parent acknowledged the continuing weakness in the briefing, with CEO Alain Monie admitting to analysts the result was “clearly unacceptable.”

Ongoing losses at the Australian company have led local directors to recommend a further injection of non-share equity of $150 million to the Ingram Micro board.

The Australian operation already has an outstanding loan note with Ingram Micro Asia Holdings of $185.8 million, according to the ASIC filing. It is unclear how much of this money is still owed by the Australian operations.

Ingram's Australian revenues for the period ending December 2011 fell from $2.1 billion to $1.4 billion - a decline of almost $650 million. It also reported an after tax loss of $184 million. A large component of the loss related to a $134 million goodwill impairment charge.

On the upside, both the ASIC filing and the analyst briefing suggested Ingram’s problems with its ERP systems – to which the company largely attributes its financial woes  – have been resolved.

Nevertheless, discussing the fourth-quarter 2012 Australian results during a call with analysts in the US last week, Monie admitted the company had lost a large amount of local market share due to "internal problems".

"I think that a good objective, given that we have readjusted our cost basis, would be for us to recover....somewhere around 50 per cent of the share that we have lost.”

Monie was more upbeat when discussing the new local management team, including recently appointed CEO Matt Sanderson.

“[He] knows well the Australian markets given that he was leading the vendor management organisation in Australia for us a few years ago," Monie said.

"So he knows the market, he knows the customers, he knows the vendors. And he has with him a team that he knows perfectly well. He has done a good job in the UK also developing our SMB market.”

Ingram COO William Humes echoed the CEO’s remarks about the importance of the Australian operation in the conference call.

"We also see, obviously, fixing Australia as an important element that we are driving hard to and are very committed to.”

The impact of Ingram’s ERP problems on its Australian operations can be gauged from some of the finer details in the ASIC report. The company’s average collection period (days of sales outstanding) blew out by almost 25 per cent, creditor days grew by almost 10 per cent and its stock turns fell from 14 times to 11 times.  

Internationally, the ERP project has not caused the same level of angst despite the issues with its Australian roll out.

Monie told analysts the 2012 roll out of the system in Malaysia caused no disruption at all and other countries including Singapore, New Zealand, Indonesia, Chile, Belgium and the Netherlands were now online.

Ingram Micro Australia declined to comment for this article.

 
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