Contract electronics manufacturer Celestica Inc. (CLS, CLS.TO) on Friday reported a 48 percent decline in second-quarter profit, reflecting lower revenues and restructuring charges related to the wind down of its manufacturing services for Blackberry maker Research In Motion Ltd. (RIMM, RIM.TO). Earnings per share missed analysts' estimates, while revenues beat their expectations.
Celestica said that in order to improve its margin performance, it will take additional restructuring actions in 2012 to reduce costs.
By the end of 2012, Celestica expects to record restructuring charges of $40 million to $50 million, including an estimated $35 million announced by the company in June 2012. The company said that of this amount, it recorded $20.1 million in the latest quarter.
For fiscal 2012, Celestica expects revenue growth to be negative as a result of the wind down of its manufacturing services for RIM and the challenging demand outlook.
Celestica's second-quarter IFRS net earnings were $23.6 million or $0.11 per share, down from $45.7 million or $0.21 per share in the year-ago period.
The latest quarter's results include $20.1 million of restructuring charges primarily related to the wind down of the company's manufacturing services for RIM.
Non-IFRS adjusted net earnings per share declined to $0.22 from $0.27 in the prior-year period. On average, 11 analysts polled by Thomson Reuters expected earnings of $0.24 per share. Analysts' estimates typically exclude special items.
Revenue for the quarter declined 5 percent to $1.74 billion from $1.83 billion in the year-ago quarter. Analysts had a consensus estimate of $1.69 billion.
Non-IFRS operating margin was 3.3 percent, compared to 3.7 percent in the same period last year.
Looking ahead, Celestica said it was withdrawing its three-year compound annual revenue growth target of 6 percent to 8 percent, and its annual operating margin target of 3.5 percent to 4.0 percent.
For the third quarter, Celestica forecasts adjusted earnings per share in a range of $0.17 to $0.23 on revenues of $1.6 billion to $1.7 billion. Analysts expect the company to earn $0.24 per share on revenues of $1.67 billion.
For the second half of 2012, Celestica projects operating margin in a range of 2.5 percent to 3 percent. Despite lower revenue expectations for 2012, the company expects to achieve its annual ROIC and annual free cash flow targets for the year.
Separately, Celestica said it has agreed to buy Fremont, California-based D&H Manufacturing Co. for $70 million. The purchase price will be financed from either Celestica's credit facility or from cash on hand.
D&H Manufacturing is a maker of precision machined components and assemblies, primarily for the semiconductor capital equipment market.
Celestica noted that the acquisition will support its strategy to grow and diversify its revenue base in the industrial, aerospace and defense, semiconductor equipment, green technology and healthcare end markets. The deal is expected to close in the third quarter of 2012.
In Friday's regular session, CLS is trading at $7.22, down $0.09 or 1.23 percent on a volume of 185,842 shares.
For comments and feedback: editorial@rttnews.com