Celestica expects revenue to improve in current quarter

Tue Apr 23, 2013 1:51pm EDT

Celestica employees work at a production line in a factory in Dongguan, China's southern Guangdong province, July 29, 2009. REUTERS/Tyrone Siu

Celestica employees work at a production line in a factory in Dongguan, China's southern Guangdong province, July 29, 2009.

Credit: Reuters/Tyrone Siu

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(Reuters) - Canadian contract electronics manufacturer Celestica Inc (CLS.TO) (CLS.N) forecast stronger revenue for the current quarter as new contracts help to make up for the loss of former No.1 customer BlackBerry (BB.TO) (BBRY.O).

Shares of Celestica, which reported a 76 percent fall in first-quarter profit on Tuesday, were up 6 percent at C$8.27 in early afternoon trading on the Toronto Stock Exchange.

"...We expect both revenue and margins to improve in the second half," Chief Executive Craig Muhlhauser told Reuters.

"From what I've seen in the first quarter, the biggest year-on-year negative variance due to weak demand is primarily in the server business."

Celestica said on Tuesday it expects revenue to rise to $1.38-$1.48 billion in the current quarter from $1.37 billion in the first quarter. Analysts on average expect revenue of $1.43 billion. The company had revenue of $1.74 billion in the second quarter of 2012.

The Toronto-based company, which also makes servers and other products for customers such as IBM (IBM.N) and Cisco Systems Inc (CSCO.O), said in June that it would stop making products for BlackBerry, as the smartphone maker continued to slash costs.

BlackBerry, formerly Research In Motion, contributed 19 percent of Celestica's first-quarter revenue last year.

The latest quarterly results, the first without revenue from BlackBerry, were largely in line with estimates, with a slight miss on sales and a modest beat on earnings.

"I think the results will be viewed in a positive light. Having in-line results and in-line guidance in this (weak-demand) environment was the best case scenario," said analyst Gabriel Lueng of Paradigm Capital Inc.

Celestica said it expects to earn 13 to 19 cents on an adjusted basis in the current quarter, compared with 16 cents in the first quarter. Analysts on average expect 17 cents per share, according to Thomson Reuters I/B/E/S.

It expects second-quarter revenue to be powered by growth in its Diversified division, which caters to industries such as healthcare, solar, aerospace and defense.

Revenue from the business, which accounts for about a quarter of the total, is expected to grow by a double-digit percentage compared with the first quarter, the company said.

The company's consumer business is also expected to generate higher revenue in the current quarter compared with the first quarter, helped a new contract with an existing customer.

The share of revenue contributed by the division had dropped to 7 percent in the first quarter from 23 percent a year earlier due to the exit of BlackBerry.

Revenue in the company's communications business, which makes networking equipment and accounts for about 40 percent of total revenue, is also expected to grow.

Although Celestica has more than 100 customers worldwide, it depends on a relatively small number for most of its revenue.

Its top 10 customers delivered two-thirds of total revenue in the first quarter, with the top two accounting for the more than 10 percent each.

Celestica's first-quarter net income fell to $10.5 million, or 6 cents per share, from $43.2 million, or 20 cents per share, a year earlier.

The stock fell 1 percent in the first quarter, while the broader S&P/TSE Canadian information technology Index .SPTTTK rose 10 percent.

(Reporting by Krithika Krishnamurthy in Bangalore; Editing by Rodney Joyce, Ted Kerr and Sreejiraj Eluvangal)

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