The listed company's profits have plummeted, and the share price is falling with them. We know the reason for the collapse
- Despite maintaining very high sales revenues, the profitability of the Asbis group in the first quarter of 2025 was influenced by unfavorable market factors, such as the boom of the grey economy in Kazakhstan or the ongoing war in Ukraine.
- Despite the difficult conditions, Asbis expects a continuation of the sales growth trend and a return to the growth of the gross margin level later this year. The lower gross margin in the first quarter is due to, among others, a high base and large sales volumes in the server category, which generates lower margins than, for example, smartphones.
- Investors have assessed the presented results and significant changes determining the lower profitability of the company. The price falls on Thursday (8 May) the most on the entire WSE, in gusts even by 10 percent.
The Asbis Group, a distributor, developer and supplier of IT products and solutions in the growing markets of Europe, the Middle East and Africa (EMEA) , generated $736 million in revenue (approx. PLN 2.9 billion) in the first quarter of this year, compared to $713 million in the same period of 2024. Revenues fell slightly, by 3 percent, year-on-year. The real slump occurred in net profitability, which amounted to $7.3 million (approx. PLN 29.5 million) in January-March 2025. Net profit was down by as much as 48 percent year-on-year.
The drop in profit indicated in the introduction is the result of the problems that Asbis is facing in Kazakhstan, which is the second largest sales market after the United Arab Emirates. Due to the intensification of the grey zone in this country, the revenue generated there fell by 46 percent year-on-year. On the revenue side, this was compensated by a 43 percent increase in sales in the UAE, which nominally amounted to $123 million.
The main reason for the decline in gross margin and thus profitability turned out to be a significant change in the structure of goods sold, largely due to problems on the Kazakh market. The first quarter of this year brought a nearly 30% decline in sales of smartphones, which were the highest-margin sales segment.
It is also significant that the first quarter of 2024 was the best first quarter for smartphones in terms of sales (they amounted to $320 million).
Server sales, on the other hand, saw an increase of over 200 percent, which resulted from the huge demand for equipment that is part of AI infrastructure, data centers, and cloud solutions. The problem in the new sales reality, however, is that servers are low-margin goods, with an average margin of around 3 percent. This means that higher sales do not translate into generating higher profits , as was the case with high-margin smartphones.
Such a significant departure in reported net profit did not escape investors' attention. From the very beginning of the session, Asbis's quotations were under significant supply pressure, which brought the price down by over 10 percent in relation to reference levels.
Currently, at the halfway point of the session, Asbis's price is falling the most on the main market of the Warsaw Stock Exchange , by almost 10 percent, with high turnover of around PLN 15 million. The company's valuation at a price of one share of around PLN 24 is slightly over PLN 1.3 billion.
wnp.pl
