Loss of RIM Puts Celestica's Income Growth on Edge PDF Print E-mail
Written by Mike Buetow   
Friday, 27 July 2012 07:35

TORONTO -- Celestica today reported second-quarter revenue rose but warned that the wind down of its RIM business would push the world's fourth largest EMS company into negative growth for the year.

For the period ended June 30, Celestica reported $1.74 billion in revenues, at the high end of company guidance, but down about 5% from last year. NEt income fell by nearly half to $23.6 million as the company took more than $20 million in restructuring charges due to the loss of the RIM business.

"Celestica continued to generate cash and achieved solid returns on invested capital in the second quarter, despite the challenging demand environment and the beginning of the wind down of our Research in Motion manufacturing business," said Craig Muhlhauser, Celestica president and chief executive. "Our priorities continue to be further diversifying our customer base and developing new capabilities to increase the value we deliver to our customers, while taking measures to prepare for an increasingly difficult economic environment."

The company expects to effectively end its supply deal with RIM by the end of September. (In the first quarter, RIM made up 17% of Celestica's total revenue.) The firm took restructuring charges of $20.1 million in the quarter related to the RIM business, and will take additional but undisclosed restructuring actions in 2012 to reduce its overall cost structure. By the end of 2012, Celestica expects to record total restructuring charges of $40 million to $50 million, including the estimated $35 million announced in June.

Celestica guided for third quarter revenue in the range of $1.6 billion to $1.7 billion. As a result of the wind down of the RIM business and overall demand outlook, the firm expects fiscal 2012 revenue to fall versus last year and withdrew its three-year compound annual revenue growth target of 6% to 8% and annual operating margin target of 3.5% to 4.0%. The expected second-half operating margin is now 2.5% to 3.0%.

Celestica also announced an agreement to acquire D&H Manufacturing, a manufacturer of precision machined components and assemblies in a $70 million deal expected to close in the current quarter. D&H has approximately $80 million in annual revenue and currently employs approximately 350 people. "This acquisition will strengthen our complex mechanical and systems integration offering, and allows us to provide additional value to our customers in the diversified markets segment of our business," Muhlhauser said.

Last Updated on Friday, 27 July 2012 09:11


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