Tight margins rule as HP and Lenovo lift NZ sales in 2018

Tight margins rule as HP and Lenovo lift NZ sales in 2018

Lenovo has split-out its A/NZ data centre business into a separate legal entity

Credit: Reseller News / Dreamstime

Both HP and Lenovo increased sales substantially in 2018 across New Zealand, but profit margins for both are tighter than ever.

HP's New Zealand unit lifted sales from $329.9 million in the year ended 31 October 2017, to $366.4 million in 2018.

It was the second successive year of increased sales for the Kiwi subsidiary, which recorded $288.5 million in 2016.

However, gross profit fell from $31.3 million to $25.2 million during 2018 after tightening margins saw cost of sales increase from $307.2 million to $351.6 million.

HP is the device business of the old Hewlett-Packard company, which split from Hewlett Packard Enterprise (HPE) in late 2015, with a focus on manufacturing printers, scanners, devices, business and home PCs.

Lower depreciation and administration expenses lifted profit before tax ahead of 2017, but tax pushed the bottom line below the prior year. Net profit after tax fell from $8.7 million to $6.3 million.

Employee payments increased year-on-year from $12.9 million to $14.1 million, while a foreign exchange gain of $2.4 million in 2017 turned into a loss of $8.6 million in 2018.

Meanwhile, arch rival in the PC and device space Lenovo also lifted sales in 2018, from $65.7 million to $79.4 million, however cost of sales also increased year-on-year from $64.6 million to $76.5 million.

That, and a $2.2 million decline in services revenues, reduced profit before tax from $585,078 to $228,706 for its year, which ended on 31 March 2018.

Where the tax effect damaged HP, it gave Lenovo an assist, with a $1.3 million tax benefit boosting net profit after tax to $1.6 million.

Lenovo's results do not include enterprise sales of servers, storage and data centre solutions.

On 1 January 2017, the tech giant split that part of its business out into a different legal entity, Lenovo Global Technology (Australia and NZ). That company has not reported any financial results as yet.

HP and Lenovo have been asked for comment.

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