10-KPeriod: FY2020

CELESTICA INC Annual Report, Year Ended Dec 31, 2020

Filed March 15, 2021For Securities:CLS

Summary

Celestica Inc.'s 2020 Form 20-F filing highlights a challenging year marked by revenue decline, primarily impacted by COVID-19 related disruptions and ongoing strategic portfolio adjustments, including the disengagement from Cisco Systems. The company reported a 2% decrease in revenue to $5.75 billion for 2020 compared to 2019. Net earnings saw a significant drop to $60.6 million, down from $70.3 million in 2019, reflecting these pressures. Despite the revenue contraction and increased restructuring charges, Celestica focused on improving operational efficiencies and expanding its higher-margin Hardware Platform Solutions (HPS) business within the Connectivity & Cloud Solutions (CCS) segment, which saw revenue growth. The Advanced Technology Solutions (ATS) segment experienced a revenue decline, largely due to impacts on the commercial aerospace and industrial sectors from the pandemic. The company's balance sheet remains solid with $463.8 million in cash and cash equivalents, and efforts to manage debt and capital allocation are ongoing.

Key Highlights

  • 1Revenue for 2020 decreased by 2% to $5.75 billion, primarily impacted by COVID-19 and strategic portfolio changes.
  • 2Net earnings declined to $60.6 million in 2020 from $70.3 million in 2019.
  • 3The Connectivity & Cloud Solutions (CCS) segment saw revenue growth of 2% to $3.66 billion, driven by an 80% increase in the Hardware Platform Solutions (HPS) business.
  • 4The Advanced Technology Solutions (ATS) segment revenue decreased by 9% to $2.09 billion, negatively impacted by COVID-19 in commercial aerospace and industrial sectors.
  • 5Restructuring charges totaled $25.8 million in 2020, primarily related to customer disengagements and demand adjustments.
  • 6The company maintained a strong liquidity position with $463.8 million in cash and cash equivalents at year-end 2020.
  • 7Celestica's top 10 customers represented 66% of total revenue in 2020, with no single customer accounting for more than 10% of revenue.

Frequently Asked Questions

Celestica's financial performance in 2020 was significantly impacted by the COVID-19 pandemic, which led to demand reductions, materials constraints, and operational inefficiencies. Additionally, the company's ongoing strategic portfolio reshaping, including the disengagement from certain programs with key customers like Cisco Systems, also affected revenue.

The CCS segment experienced a 2% revenue increase to $3.66 billion, largely driven by strong growth in the Hardware Platform Solutions (HPS) business. The ATS segment saw a 9% revenue decrease to $2.09 billion, primarily due to adverse impacts from COVID-19 on its commercial aerospace and industrial businesses, and the Boeing 737 Max program halt affecting the A&D business.

For 2021, Celestica targets growth of approximately 10% in ATS segment revenue and high single-digit growth for its HPS business within the CCS segment. Non-HPS CCS revenue is expected to decline due to customer disengagements. The company also aims to improve ATS segment margins to 5%-6% and CCS segment margins to 2%-3%.

Celestica is focused on maintaining a strong balance sheet and lowering outstanding borrowings. The company repaid over $120 million of long-term debt in 2020. Its capital allocation strategy includes returning approximately 50% of non-IFRS free cash flow to shareholders annually (when permitted), investing 1.5%-2.0% of revenue in capital expenditures, and pursuing disciplined strategic acquisitions.