Component distributors benefit as OEMs start to rebuild order backlogs

According to Afdec, the channel is continuing to experience improving demand and activity from UK customers together with more stabilised component manufacturing lead times. The report warns that there is a sporadic product shortage in some areas - particularly in the analogue semiconductor sector - but indicators suggest that these issues are being resolved by the manufacturers. Whilst welcoming the improvement in market conditions Afdec chairman Adam Fletcher (pictured) believes that many UK customers are increasing their order cover principally due to concerns over extending lead times and product availability, but at the same time are attempting to decrease their raw material inventory and scheduling deliveries to meet their demand. Fletcher said: "The further improvement in the book-to-bill ratio we saw in February suggests that customers are continuing to rebuild their order backlogs towards normal industry levels but I suspect that as yet the end product is not being consumed. Our members have identified no single demand driver in the UK (or elsewhere), suggesting that the underlying demand could be the aggregate of several smaller drivers or more likely, that demand remains weaker than may be perceived." Afdec reports that total monthly billings (Net sales invoiced less credits) in February 2010 increased by 1.6%, when compared to the previous month and by 16% when compared to the same month last year Changes by product group when compared to February 2009 were as follows: Semiconductors increased by 26.5% Passives increased by 18.7% Electro-mechs increased by 10.6% Component Assemblies increased by 7.6% Other Products declined by 26.2%. The book-to-bill ratio in February 2010 improved further at 1.19:1 with the strong bookings growth continuing in all components products sectors with the exception of 'other products'. The overall stock turn remained at 2.6 times and total inventory remained essentially flat at £161million, yielding an improved 'turn earn' ratio of 86:100. The overall debtor days increased by one day when compared to the previous month, but remained within the normal range. The sales by month 'three month moving average' for all components continued to trend up suggesting that the March 2010 figures will show a further billings growth.