Downturn hits distributors

Downturn hits distributors

At least two distributors are suffering in the harsh economic conditions, marked by unfavourable exchange rates, price hikes and deferral of major orders.

After slashing profit predictions for the year, Renaissance says it is not the only distributor at the mercy of the market.

The company had originally forecast a profit for the year to December of between $5.2 and $5.5 million, but downgraded this to between $3 and $3.5 million.

Managing director Paul Johnston says there is a general downturn in distribution and his firm has experienced deferrals on major purchase orders.

“We know a number of distributors are finding it very difficult, and some of them have seen some quite big downturns in some parts of the business,” he claims.

Exchange rate fluctuations have also caused uncertainty over some product ranges at Renaissance, resulting in price increases on some products. These factors have negatively impacted sales.

“There’s been a delay in purchases by a number of organisations and some fairly large deals, particularly around the networking space, have been deferred,” Johnston says.

Cellnet chief operating officer Rob Buckman says his company is also seeing price rises as a result of the exchange rate, and expects this will continue if the New Zealand dollar remains depressed.

“Through our IBM-Lenovo portfolio, for example, we’ve had some price increases. On our mobile accessories business we’re certainly starting to feel the pinch on some of the fluctuations – it dropped about 20 percent in a matter of two or three weeks.”

Buckman says some of Cellnet’s forward contracts are nearing their end, with the company being forced to buy at 60 US cents instead of 70 or 75 cents as it could a month or six weeks ago.

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