Premier Farnell hit by Q2 profit fall

LONDON (Reuters) - Electronic components distributor Premier Farnell (PFL.L) posted a 10 percent drop in second-quarter profit, sending its shares down as much as 9 percent, although it saw signs of improvement in August sales.

"It is our sense that the destocking in the electronic sector has begun to abate," Chief Executive Harriet Green said in an interview with Reuters on Thursday.

"Customers are beginning to purchase, are beginning to innovate and we're beginning to see signs of that in the supply chain," Green said.

Premier Farnell distributes items from batteries to microchips to companies such as Philips (PHG.AS) and Microsoft (MSFT.O) and also counts Nokia (NOK1V.HE) and Erikson among its customers.

Profit before tax fell 10 percent to 16.2 million pounds for the three months ended August 2. Sales dropped 17 percent to 183.7 million pounds, accelerating a 15 percent decline in the first quarter.

Shares in Premier Farnell fell 7.98 percent to 150 pence at 1220 GMT. The stock has outperformed the FTSE All Share Index .FTAS by about 5 percent in the year to date.

Analysts attributed the fall to the slightly worse-than-expected second-quarter results, along with the market taking a breather from a recent rally which has seen shares rise 14 percent over the past month.

Green said the company was well positioned and noted that revenue declines in Europe and Asia Pacific have abated.

A BETTER AUGUST

"Group sales growth (overall) in August has shown an improvement on the performance reported in the first and second quarters of this year," she said.

Electrocomponents (ECM.L), Premier Farnell's main rival, said its major markets were stabilising when it reported a fall in first-quarter sales of 17 percent in July.

Green would not comment on full-year guidance, but said overall the company was optimistic.

KBC Peel Hunt analyst Henry Carver said the results were slightly below his forecasts, but the company, which was in the middle of restructuring when the recession hit, has coped well.

"In the long term I'm positive on them, but there's still a bit of a way to go before getting really enthusiastic," he said.

Panmure analysts kept a "buy" rating on the stock.

"These results confirm that while conditions remain tough, there are signs of revenues beginning to bottom out. With a clear strategy and attractive dividend yield, we stay positive."

The current market forecast is for full-year pretax profit of 56 million pounds, according to a consensus of 10 analysts compiled by Reuters Estimates. Estimates range from 46.7 million to 65.6 million pounds.

The company kept the interim dividend flat at 4.2 pence.

(Editing by Rupert Winchester)