Celesica Reports $7 Million Mexico Loss in Third Quarter

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<?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Toronto--Celestica's Mexico plant continued to operate at a loss in the third quarter, dampening the company's overall financial results. The Mexican operation is not expected to break even until early 2007. Celestica's overall operating margin was 2.7%. While this is an increase from the previous quarter, it still did not meat analyst expectations.

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The Monterey plant endured a $7 million loss in the third quarter. Company officials had hoped the operation would break even in the quarter. While company officials expect the loss to narrow in the fourth quarter, the break even point will not come this year. Celestica forecast a fourth-quarter adjusted net of 15 cents to 23 cents a share on revenue of $2.25-$2.45 billion.

According to company officials, Celestica still moving capacity from its high-cost plants in the U.S. to the lower-cost Monterey plant. Problems associated with this capacity shift are blamed for the lower-than-expected Mexican profitability.  

Celestica CEO Steve Delaney was quoted in a published report as saying, "In the third quarter we saw quite ... demand fluctuation and things got very intense as we attempted to get all the parts cleared and get the production through the plant towards the end of the quarter." This "demand fluctuation" should abate in the final quarter of 2006, helping the company turn the tide in Monterey.

Company leaders expect Celestica's overall profitability to improve once its Mexican house is in order.

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