The eastern European distributor ASBIS has been badly affected by a decline in sales in Russia, Ukraine and nearby countries. Results for Q1 2015 show revenues decreased overall by 17.69% to $281.8m, from $342.4m in Q1 2014, mostly due to lower market demand in many geographies and strong competition on the own brands business.
A country-by-country analysis confirms that a major decrease in sales was noted in the markets directly affected by the political crisis in Ukraine where sales fell 70%; Russia was down over 50%. Revenues in the Czech Republic and Bulgaria decreased as well, due to lower sales of own brands and limited trading in third-party smartphones. The company’s revenues in other CEE countries grew, with the most significant improvement noted in Poland. Additionally, sales in Slovakia grew, based on a rich portfolio of products, to become the company’s top market in revenues in Q1 2015.
Gross profit decreased to $6.9m, from $22.2m in Q1 2014, due to lower revenues and one-off events: clearing of inventories at lower prices and warranty losses. The company continued to reduce its expenses, cutting admin, selling and financial costs by 29.64%, 12.60% and 37.59% respectively. This was not enough however to fully offset the decrease in gross profit. As a result, in Q1 2015 the company generated a net loss after taxation of $12.4m, in comparison to a net loss after taxation of $3.4m in Q1 2014.
Although continuation of unfavourable market conditions in the Former Soviet Union is expected for the rest of this year, the company observes improvement in other regions, and expects revenues and gross profit to start growing from Q2 2015 and the overall results to further improve in the second half of the year, as was the case in 2014.
Siarhei Kostevitch, CEO and Chairman of ASBISc Enterprises Plc, commented: “We were prepared for a much better quarter in terms of sales. However, due to market weakness, a lot of customers postponed new orders while they were flushing out old stocks. This resulted in lower sales and a lower gross profit. Sales at lower prices also contributed to this decrease. Our results have been also affected by warranty losses.”
Kostevitch continued: “The inventory sell-out and warranty losses cost us about $7.1m. While we expect the former sovier market to remain weak this year, we have changed our inventory plans, taken actions to resolve warranty claims, and revised our credit risk policy. As a result, we do not expect all these factors that affected our Q1 2015 results to happen again in the future. Our revenues and gross profit margin are expected to start growing from Q2 2015, with significant improvement expected to be delivered in the second half of the year.”