Celestica Inc. got that old familiar feeling when telecommunications customers suddenly put on the brakes toward the end of 2006. The unexpected shift in demand, combined with a buildup of inventory at its Monterrey, Mexico faclity, left the company with a net loss for both the quarter and fiscal year.
As a result, Celestica (Toronto) today announced further restructuring of its operations that added $59 million of cost against its bottom line.
The announcement called to mind events leading up to the industry-wide inventory debacle of 2001 that began with a sudden drop in demand from telecommunications OEMs, then the largest customer segment for EMS providers.
Analysts recently warned of swelling inventory levels at EMS and semiconductor companies.
Celestica reported fourth quarter revenue was $2.26 billion, up 9 percent from $2 bilion in the same quarter of 2005. GAAP net loss for the quarter was $60 million, or 27 cents per share, compared to GAAP net loss of $28.2 million, or 12 cents per share for the same period last year.
The 4Q loss included the restructuring charge and a $30 million charge against gross profits from a previously announced increase in inventory at the Monterrey facility—a site celebrated by Celestica as a model for its company-wide lean manufacturing effort.
"We have implemented and will continue to implement aggressive actions to materially improve the performance of our Mexican facilities by standardizing our ERP platform, re-architecting our warehouse logistics and strengthening the local management team while driving more efficiency and cost reductions, said Craig Muhlhauser, who was recently named president and CEO of Celestica.
Mulhauser said ongoing restructuring will add costs of $20 million to $40 million during 2007.
Celestica's revenue for fiscal 2006 was $8.8 billion, up 4 percent from $8.47 billion recorded for 2005. Net loss on a GAAP basis was $150.6 million or 66 cents per share compared to net loss of $46.8 million or 21 cents per share for