Celestica Q3 falls short as RIM relationship winds down

Celestica CEO Craig Muhlhauser said despite missing its guidance, the company's Q3 was part of a larger trend of improvement.

Celestica CEO Craig Muhlhauser said despite missing its guidance, the company’s Q3 was part of a larger trend of improvement.

Celestica (TSX:CLS) this afternoon announced its Q3, 2012 results. The company earned (US) $43.7-million on revenue of $1.58 billion, which was lower than the guidance of $1.6 to $1.7 billion it had provided in July.

Nonethless, Celestica announced it would conduct a substantial issuer bid to buy back up up to $175 million of its subordinate voting shares. This will be conducted concurrently with the normal course issuer bid the company continued into Q3 with the purchase of 2.7-million shares, for which it paid $21.2 million.

Celestica CEO Craig Muhlhauser said despite missing its guidance, the quarter was part of a larger trend of improvement: “Celestica delivered consistent profitability, solid returns and strong free cash flow in the third quarter, despite the challenging environment.” he said, adding: “While we are taking the appropriate cost reduction actions to respond to the challenging economic environment, we continue to invest for our future and focus on delivering innovative solutions and operational excellence that creates value for our customers.”

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Margin has always been a part of the conversation with Celestica. Assembling Blackberrys, as well as other consumer products such as XBoxs and iPhones, was once Toronto-based company’ s bread and butter. But the IBM spinoff saw continual valuation woes as its electronics manufacturing services faced increased competition from China. This meant margins in an already difficult business were becoming razor thin. More recently, Muhlhauser a former exec with Ford and GE who joined Celestica in May 2005, has looked to move the company up the value chain to replace the business it recently ended with RIM, which was as much as 20% of Celestica’s total revenue.

For the third quarter of 2012, RIM represented just 10% of Celestica’s total revenue, down from 17% in Q2 and 19% for 2011. The company expects restructuring charges related to the RIM wind down to continue into the first half of 2013 and will total somewhere between $40 million and $50 million, $27.3 million of which has already been recorded.

Shares of Celestica on the TSX closed today down 1.6% to $6.97.

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About Nick Waddell

Cantech Letter founder and editor Nick Waddell has lived in five Canadian provinces and is proud of his country's often overlooked contributions to the world of science and technology. Waddell takes a regular shift on the Canadian media circuit, making appearances on CTV, CBC and BNN, and contributing to publications such as Canadian Business and Business Insider.

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