TORONTO -- Celestica reported fourth quarter revenue or $1.73 billion, up 1% from a year ago and at the lower end of previous guidance.

Net income was $13.6 million, down from $60.1 million a year ago, due in part to restructuring charges. The operating margin was 3.5%, up 30 basis points.

The firm also noted progress on its previously announced restructuring, but said it would extend completion of the plan by six months.

During the quarter ended Dec. 31, Advanced Technology Solutions segment revenue increased 11% from 2017, and represented 33% of total revenue. Segment margin was 3.7%, down from 5.2% in 2017. Connectivity & Cloud Solutions segment revenue increased 10% and had a margin of 3.3%, up 100 basis points from 2017.

ATS is comprised of the EMS company's aerospace and defense, industrial, smart energy, healthtech, and capital equipment businesses. CCS consists of enterprise communications, telecommunications, servers and storage.

“Celestica delivered on its Q4 consolidated non-IFRS operating margin target of 3.5%, driven by strong performance in our CCS segment and our aerospace and defense business,” said Rob Mionis, president and CEO, Celestica. “We were particularly pleased that we achieved this key margin metric despite the impact of slower cyclical demand from our capital equipment customers, which had an adverse impact on ATS segment margin for the quarter. Although we remain positive about our positioning and the long-term growth prospects of the capital equipment business, we will focus our efficiency initiatives during the first quarter of 2019 on improving margins and better aligning this business to the current revenue environment.”

Full-year revenue was $6.14 billion, down 7.7% from 2017. Net income rose 6.7% to $105.5 million. 

“We made good progress in 2018 on our long-term revenue diversification and strategic priorities, including delivering sequential margin expansion in every quarter since Q1, and growing our strong leadership positions within the aerospace and defense, and capital equipment markets.," said Mionis. "As we enter 2019, we will continue to focus on driving better inventory performance as the constrained materials environment modestly improves, completing our efficiency initiatives to drive margin expansion, and continuing the diversification of our revenue and earnings in order to drive sustainable profitable growth.”

The company plans disengage from some CCS customer programs that do not meet strategic objectives. As a result, CCS business revenue, which totaled $4.4 billion in 2018, is expected to decline approximately $500 million over the next 12 to 18 months.

Celestica also noted lower revenue from semiconductor capital equipment orders due to cyclical decreases in demand primarily in the second half. It took a loss in the mid-single digit million dollar range in the fourth quarter, and expects demand from the sector to remain soft throughout 2019. The firm is undergoing a restructuring to align the unit to current demand, and took $43 million in charges in 2018, including $6.4 million in the fourth quarter. It estimates total restructuring charges for the initiative will be within its previously disclosed range of $50 million to $75 million.

The company also noted the November acquisition of Impakt, a contract manufacturer of LCD and OLED displays, for $325.4 million net of cash.

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