Celestica wins higher margin business as RIM relationship winds down

Celestica CEO Craig Muhlhauser says Celestica is now adding jobs because it is winning business in sectors where the absolute bottom line price is less important than reliability and oveall cost of ownership. Onward and upward.

Celestica CEO Craig Muhlhauser was on BNN’s “The Street” this morning with hosts Tony Keller and Saijal Patel to to talk about life for the company as its long standing relationship with Research in Motion winds down.

Muhlhauser, who joined the show from the Canaccord Genuity Growth Conference in Boston, said Celestica has been investing in new markets and new customers. “We have been building capabilities outside of the consumer space” he noted, pointing out that areas such as aerospace and defense, healthcare, alternative energy, semiconductors and capital equipment are seeing growth of as high as 40-50%.

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Assembling Blackberrys, as well as other consumer products such as XBoxs and iPhones, was once Celestica’s bread and butter. But the Toronto-based 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. Muhlhauser looked to move the company up the value chain to replace the business it had with RIM, which was as much as 20% of Celestica’s total revenue.

On June 18th, however, the company announced that within the next six months it will end its manufacturing services for Research in Motion.

Muhlhauser says Celestica is now adding jobs because it is winning business in sectors where the absolute bottom line price is less important than reliability and overall cost of ownership.

Celestica’s numbers are proving out Muhlhauser’s theories. The company’s fiscal 2011′s revenue was $7.2-billion, up 11% from prior year, and its earnings, long a source of consternation in Celestica’s notoriously low-margin manufacturing business, were up too. Adjusted net EPS (non-IFRS) was $1.11 per share in 2011, up 29% from 2010. The company’s Q2, 2012 revenue, reported late last month, was down slightly, from $1.82-million to $1.74-million, but the company earned nearly double what it did in 2011’s Q2.

Muhlhauser, a former exec with Ford and GE, joined Celestica in May 2005.

Click here to view the full interview.

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