The reported net loss of A$836,000 ($939,642) by Cellnet Australia will have no impact on the distributor's local business, as the two companies operate separately, says New Zealand general manager John Dunbar.
“Cellnet New Zealand operates in a separate market and sells different products,” he says.
Australian Reseller News (ARN) reports that the drop in profits was due to doubtful debt provisioning and the loss of distribution contracts with Apple and HP.
However, Dunbar says Cellnet Australia did not lose the contracts but decided to end them.
“Apple and HP are very low margin and high volume products so they’re looking at more value-add products and more niche parts of the market as well. Cellnet Australia did a product analysis of how much [gross profit] these brands bring in and what it costs to sell the products.”
According to its half-yearly results, Cellnet Australia experienced an 8.1 percent drop in revenue year-on-year, from A$265.8 million ($298.7 million) to A$244.3 million ($274.5 million). ARN also reports that net profits of A$2.8 million ($3.1 million) in the first half of 2006 were due largely to an A$2.2 million ($2.4 million) profit on the sale of its New Zealand premises.
Cellnet Australia attributed the profit wipeout in the first half to a substantial provision for doubtful debts of A$3.1 million ($3.4 million). This followed a review of Cellnet’s credit collection process, which found A$2.7 million ($3 million) worth of debts at June 30, 2007, that had not been provided against, says ARN.