UPDATE 1-Celestica's revenue, margins to suffer as RIM withdraws

Fri Jul 27, 2012 9:50am EDT

July 27 (Reuters) - Contract electronics manufacturer Celestica Inc warned its revenue would fall this year due to weak demand and as it stops making BlackBerrys for its biggest customer, Research In Motion Ltd .

Celestica, which also reported that second-quarter profit fell by almost half, said operating margins for the year would be lower than expected.

Losing RIM as a customer forced Celestica, which also makes products for IBM and Cisco Systems Inc, to take steps to cut costs to improve its margins.

While it did not say what actions it would take, it expects restructuring charges of $40 million and $50 million this year, about half of which was booked in the second quarter.

The Toronto-based company also said it would spend $70 million to buy D&H Manufacturing Co, which makes precision machined components mainly for the semiconductor industry.

PULLS GROWTH TARGETS

The company now expects revenue to fall in 2012 and operating margins of 2.5 percent to 3.0 percent in the second half of the year.

The company also withdrew its target of annual revenue growth of 6 percent to 8 percent and its target of annual operating margins of 3.5 percent to 4.0 percent.

Celestica said it expects adjusted earnings of 17 cents to 23 cents per share in the current quarter, which was short of analysts' expectations of 24 cents a share, according to Thomson Reuters I/B/E/S.

However its revenue forecast of $1.6 billion to $1.7 billion in the current quarter, with a 10 percent contribution from RIM, was in-line with analysts' estimates of $1.67 billion.

Celestica's second-quarter revenue fell 5 percent to $1.74 billion, 17 percent of which came from RIM.

Profit in the quarter fell to $23.6 million, or 11 cents a share, from $45.7 million, or 21 cents a share, a year earlier.

Celestica shares were trading down 1.35 percent at C$7.27 in early trade Friday on the Toronto Stock Exchange.

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