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Celestica Inc., a leader in design, manufacturing and supply chain solutions for the world's most innovative companies, has announced financial results for the quarter ended March 31, 2021 (Q1 2021).
“We had a strong start to the year as we delivered solid results for the quarter. Our revenue, non-IFRS adjusted EPS* and non-IFRS operating margin* were all above the midpoint of our guidance ranges for Q1 2021. In addition, we were able to further reduce our debt, while also returning capital to shareholders through our share buyback program,” said Rob Mionis, President and CEO, Celestica.
“We are pleased with our operating performance despite the continuing challenges from the COVID-19 pandemic. We are excited by the opportunities in front of us and continue to focus on executing for our customers while driving profitable growth.”
Segment Updates
ATS Segment:
ATS segment revenue decreased in Q1 2021 compared to Q1 2020, driven primarily by adverse demand impacts related to coronavirus 2019 disease and related mutations (COVID-19), specifically in our commercial aerospace and Industrial businesses, as well as adverse revenue impacts due to COVID-19-related materials constraints across the segment. The decreases were largely offset by revenue growth in our HealthTech and Capital Equipment businesses, driven by new program ramps and market share gains. The increase in ATS segment margin in Q1 2021 compared to Q1 2020 was primarily due to favorable mix, including new program ramps in our HealthTech business, as well as improved productivity. We are pleased with the year-over-year improvement in ATS segment margin, and continue to anticipate being in the ATS segment target margin range of 5% to 6% by the end of 2021. We also continue to expect ATS segment revenue to grow by 10% in 2021 as compared to 2020.
Revenue from our semiconductor Capital Equipment customers grew in Q1 2021 compared to Q1 2020, driven by strong demand, new program wins and market share gains. We expect semiconductor demand to remain strong in 2021. We anticipate demand growth to accelerate towards the end of 2021 and into 2022 in our display business.
Within A&D, we continued to experience demand softness in our commercial aerospace business. We have taken actions deemed necessary to adjust our cost base to better align with the current and anticipated demand levels in our A&D business, and continue to work with customers and suppliers to maximize our returns in the face of the challenges presented by the current market. While we do not expect our commercial aerospace business to return to pre-COVID levels in the near term, we do expect a modest sequential recovery in the second half of the year, driven by new program wins.
Demand in our Industrial business in Q1 2021 compared to Q1 2020 was adversely impacted by COVID-19, although demand has largely stabilized. We expect year-over-year revenue growth to resume in the second quarter of 2021 (Q2 2021).
Our HealthTech business continued to see strong growth, supported by the ramping of new program wins in Q1 2021, attributable in part to programs in support of the fight against COVID-19. We anticipate continued strength in demand in this business in 2021.
CCS Segment:
CCS segment revenue decreased in Q1 2021 compared to Q1 2020, primarily due to the impact of our disengagement from programs with Cisco Systems, Inc. (Cisco Disengagement), which was completed at the end of 2020 as planned, as well as program-specific demand softness from certain storage customers in our Enterprise end market. This decline was partially offset by strong demand from service provider customers, including in our Hardware Platform Solutions (HPS) business. Our HPS business experienced strong revenue growth in Q1 2021, increasing 46% compared to Q1 2020, driven by increased service provider demand. CCS segment revenue from programs with customers other than Cisco increased 16% in Q1 2021 compared to Q1 2020. Although we anticipate that total CCS segment revenue for 2021 will decline compared to 2020, we currently expect double-digit percentage revenue growth for our HPS business in 2021 compared to 2020, increased from our prior high single-digit percentage growth expectations. Despite lower revenue levels, CCS segment margin improved in Q1 2021 compared to Q1 2020, primarily due to favorable mix. CCS segment margin is expected to be at the high end of our 2% to 3% target range, or slightly higher, for the full year 2021.
Supply Constraints:
Supply constraints continued to impact both of our segments, predominately in our ATS segment in Q1 2021, resulting in extended lead times for components, and delays in timing on certain projects. We expect this pressure to continue for the remainder of 2021.
