IT distributor ASBIS says its results in H1 were negatively affected by the crisis in Ukraine and Russia. As the company has posted a $1.44m (€1.08m) net loss at the end of Q2 2014 against $1.38m (€1.03m) net loss in Q2 2013, it says the revenues showed a significant drop too.
Although the revenue in Q2 slightly improved on a quarter-to-quarter basis (by 5.6%), in general terms it deteriorated. In Q2 ASBIS saw a 22.19% year-on-year drop in revenues to $361.5m (€270.5m) and in the first six months of the year the overall revenues went down by 22.5%. EBIDTA decreased by 58.4% to $6.1m (€4.6m)y/y.
The weaker demand in Russia and Ukraine and large portion of inventory in April and May brought about deterioration in gross profit margin which fell by 0.43% y/y in Q2. However, for the whole H1 the gross profit margin was 4.82% higher than in H1 2013.
Despite the general political instability in Ukraine, ASBIS’ historically third largest market, and its negative impact on the company’s operations both in Russia and other neighbouring markets, ASBIS was also affected by significant local currency devaluation against US dollar, its reporting currency, it says. This included the Russian ruble, Ukrainian hryvnia and Kazakhstani tenge.
To offset the negative business trends and weaker demand in Ukraine and Russia, ASBIS was forced to introduce the precautionary measures. It decided to redirect the business to other markets, implement cost cutting and a conservative stand on new purchases. Also, the all operations in Ukrainian and Russian markets should be scaled down to a level that can be locally financed, it says.
ASBIS also managed to decrease its administrative and selling expenses as well as it began to cut jobs.
Other measures include strengthening its channel in Western Europe and in other states of the CEE region where it sees pretty healthy business in the countries like Poland, the Czech Republic and Slovakia, it says.
Additionally, the company wants to focus on its own brands Prestigio and Canyon in order to improve its gross profit margins in the future and plans to invest in new products such as wearable IT, smart home and smart health.
“We are currently operating in tough times, because two of our three top markets – Russia and Ukraine – have been affected by political and economic turbulence. This has affected demand and total sales have contracted. However, after a very tough Q1 2014 it seems we have found our way. We have redirected a part of the business lost in the F.S.U. region mostly to the CEE region and seen impressive growth in countries like Poland, Slovakia and the Czech Republic. Even if Q2 revenues were lower than a year ago, they were already higher than in Q1 of this year, and this is not the usual situation in the distribution business. We have also eliminated FX losses and introduced a deep cost reduction program in Q2 that allows us to save around USD 1 million every month. Hence we are confident of delivering profits this year and fulfilling our financial forecasts,” says Siarhei Kostevitch, CEO and Chairman of ASBISc Enterprises Plc.
Revenues for the whole 2014 are forecast to range between $1.6bn (€1.2bn) and $1.75bn (€1.3bn), and net profit after tax is forecast to range between $4m (€2.99m) and $5m (€3.74m).