BDT warns of mid-year crunch time for volume business
- 24 January, 2009 22:00
BDT predicts some players in the volume IT business won't survive beyond the middle of the year, with increasing pressures on price and unsustainable margins. The warning comes after the distributor closed its electronics division, prefering to focus on its more profitable Mitsubishi Electric business.
Managing director Ken Lilley says the industry will need to rationalise and his company's board foresees the closure of some firms in coming months.
"The outlook is volumes are going to come under pressure and pricing has already come under pressure. We were the first [to close a division] and in my view you'll see a couple of others shut their doors in the next six months. In about June or July the board believes there will be a crunch time; companies just can't make money."
The unfavourable exchange rate for importers will be a contributing factor, while local system building is becoming less and less sustainable as fully built systems become cheaper, Lilley claims.
BDT's original equipment manufacturer business accounted for only about 5 percent of the company's total profit, while the margins were low. By contrast, its air conditioning distribution business has been growing 30 percent year on year, Lilley says.
The group considered a merger prior to closing the division, and Lilley believes this may be a good option for market entrants that have failed to secure the market share required to break even.
Of the 75 staff across BDT's three offices, there will be about seven redundancies unless staff can be redeployed within the group, he says. The company has already received employment offers for staff who may lose their jobs.