Celestica missed the mark in 1Q19

Celestica’s 1Q19 revenues amounted to USD 1.43 billion, compared to the 1Q19 guidance range of USD 1.45 to USD 1.55 billion, a decrease of 4% compared to USD 1.50 billion for the first quarter of 2018. The company’s operating margin sat at 2.4%, compared to the guidance range of 2.6% and 3.0% at 1Q 2018. IFRS net earning amounted to USD 90.3 million, up USD 76.2 million YoY. "Celestica's first quarter results reflect the near-term challenges we are seeing in some of our key end markets" says Rob Mionis, President and CEO, in a press release. "Despite this, we improved cash generation and aggressively executed on our share repurchases. During this lower revenue period, we will continue to implement our productivity initiatives in order to more efficiently align cost to current volumes, and to improve the stability and profitability of our business.” The Advanced Technology Solutions (ATS) segment revenue increased 9% compared to Q1 2018, and represented 40% of total revenue as compared to 36% for Q1 2018. The Connectivity & Cloud Solutions (CCS) segment revenue decreased 12% compared to Q1 2018, and represented 60% of total revenue as compared to 64% for Q1 2018. "We remain committed to our transformation strategy which we believe will drive more consistent, diversified and sustainable results in the future. Our CCS portfolio review is mostly complete and we are encouraged by the related benefits. As we continue to drive improvement in both of our segments, we intend to maintain our balanced approach to capital allocation, supported by a strong balance sheet," Mionis continues. Celestica continues to progress with the review of its CCS revenue portfolio (CCS Review). The company commenced this review in the second half of 2018 to address under-performing programs that no longer align with its strategic objectives. The CCS Review is currently expected to result in a decline in the CCS segment revenue of approximately USD 500 million over the next 9 to 15 months The company says that the decrease in CCS segment revenue in Q1 2019 as compared to the prior year period was primarily due to planned program disengagements in the company’s Enterprise end market resulting from the CCS Review, as well as late quarter demand softness from certain Communications customers. “We saw a reduction in orders from several Communications customers, as they consumed their inventory buffers previously built up to manage materials constraints. Additionally, reduced demand for some programs resulted from the impact of next generation program transitions. We expect these adverse market dynamics in our Communications end market to continue into the second quarter of 2019,” the press release reads. If demand softness in our Communications end market persists into the second half of 2019, total company revenue for 2019 could decrease year over year at the high end of the single digit percentage range previously anticipated to result from the CCS Review alone.