TORONTO – Celestica reported fourth quarter revenue of $1.4 billion, down 7% year-over-year.

ATS segment revenue decreased 12% compared to the fourth quarter of 2019, representing 37% of total revenue, compared to 39% of total revenue in the prior year period.

The decrease is primarily attributed to adverse demand impacts related to Covid-19, specifically in the commercial aerospace and industrial businesses. The decreases were partially offset by revenue growth in health tech and capital equipment, driven by new program ramps.

Demand from semiconductor capital equipment customers improved year-over-year, and Celestica expects demand to remain strong in 2021. The company also anticipates demand growth toward the end of 2021 in its display business.

Within A&D, demand in defense remained stable, while the firm continued to experience demand reductions in commercial aerospace. The company expects weakness in the commercial aviation industry due to Covid-19 to persist throughout 2021. Celestica is encouraged by order momentum in its A&D business, with over half of the incremental orders in 2020 coming from new customers.

While demand in industrial was adversely impacted by Covid-19, there has been a gradual recovery of demand across the customer base in this business since the second quarter of 2020. Although revenues declined compared to the prior year period, the contribution of this business to profitability improved from the fourth quarter of 2019 as a result of cost-reduction initiatives and ramping new programs.

Health tech continued to benefit from demand strength, reflected in new program ramps, attributable in part to new program wins to support the fight against the pandemic. Celestica anticipates continued strength in demand in this business in 2021.

CCS segment revenue decreased 4% year-over-year, representing 63% of total revenue, compared to 61% of total revenue in the fourth quarter of 2019.

CCS segment revenue decreased primarily as a result of the company’s disengagement from programs with Cisco Systems, which were completed at the end of 2020 as planned. This decline was offset in large part by strong demand from service providers in communications.

The CCS joint design and manufacturing business was up 53% year-over-year. HPS revenue for the full-year 2020 was $862 million, up 80% year-over-year.

Celestica anticipates CCS revenue to decline for full-year 2021, but the company expects continued strength in the HPS business this year.

“Celestica delivered a solid fourth quarter to end the year, with revenue within our guidance range and non-IFRS operating margin and non-IFRS adjusted EPS above the midpoint of our guidance ranges,” said Rob Mionis, president and CEO. “We ended the year with 80% non-IFRS adjusted EPS growth compared to 2019.

“We believe our strong performance in 2020 against the backdrop of a global pandemic is a testament to our team’s ability to maintain business continuity and meet our commitments to our customers. The work we have done over the past few years aimed at building a more diversified business helped us manage this unprecedented year. As we enter 2021, we remain focused on executing for our customers and driving consistent, profitable growth for our shareholders.”

The firm ended the quarter with $464 million in cash/cash equivalents.

While Celestica continues to make progress on strategic initiatives, including portfolio reshaping, productivity and cost initiatives, Covid-19 continued to have an adverse impact on business in the fourth quarter. In addition to demand reductions in several of end markets, the company was adversely impacted by Covid-19-related costs, consisting of direct and indirect costs, including manufacturing inefficiencies related to lost revenue due to the inability to secure materials, idled labor costs, and incremental costs for labor, expedite fees and freight premiums, cleaning supplies, personal protective equipment, and IT-related services to support work-from-home arrangements.

During the fourth quarter, the company qualified for and recognized Covid-19-related government subsidies, credits and grants and customer recoveries, which helped mitigate the adverse impact.

The company recorded a total of approximately $26 million in restructuring charges during 2020, compared to a previous estimate of $30 million. Celestica recorded approximately $7 million of restructuring charges in the fourth quarter.

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