October 23, 2008 / 8:49 PM / in 9 years

UPDATE 2-Celestica profit tops forecasts as demand holds up

* Mexican, European operations turn around

* Outlook in line with expectations

* Shares dip ahead of earnings release

(Adds CEO comments; In U.S. dollars unless noted)

By Wojtek Dabrowski

TORONTO, Oct 23 (Reuters) - Contract electronics maker Celestica Inc (CLS.TO) CLS.N reported a third-quarter profit on Thursday that topped analysts' expectations as it shored up its struggling operations in Mexico and Europe.

Craig Muhlhauser, the company's chief executive, told analysts during a conference call that Celestica won business in areas such as gaming, smartphones, flat-screen televisions and printing.

This, combined with stable revenue in the quarter, suggests that at least part of the demand for the products the company makes is holding up despite a global economic slowdown.

"As we look back, it obviously was one of the highest booking quarters that we've had in the last three years," Muhlhauser said.

Celestica, which makes products for companies like IBM (IBM.N) and Microsoft (MSFT.O) said it earned $32.1 million, or 14 cents a share, in the three months ended Sept. 30. That was down from a profit of $51.5 million, or 22 cents a share, a year earlier.

The company, which also delivered a fourth-quarter outlook roughly in line with analyst expectations, said the profit drop was due to lower tax recoveries and higher restructuring charges. These were offset in part by better operating earnings, it added.

Adjusted profit jumped to 24 cents a share from 13 cents a share a year earlier.

Both the net and adjusted profit results beat analysts' expectations, according to Reuters Estimates. Celestica's revenue, which stayed almost flat at $2.03 billion, also came in ahead of predictions.

Investors have sold off Celestica's shares in recent months, concerned with the company's ability to attract and win new business amid a global economic slowdown.

Muhlhauser said the results in the quarter were "driven predominantly by our operating improvements in Mexico and Europe."

Those operations -- which turned a profit in the quarter -- had been an ongoing problem for Celestica and had prompted the company to launch yet another restructuring effort more than a year ago aimed at stemming mounting losses.

The company has laid off a total of about 9,000 workers since 2005 in a bid to clamp down on costs and cope with a drop in demand.

For the fourth quarter, Celestica said it expects revenue of between $1.75 billion and $2 billion and adjusted earnings per share of between 16 and 24 cents.

The company released its results after markets closed. During the day, its shares dipped 4 Canadian cents to close at C$4.68 on the Toronto Stock Exchange.

$1=$1.25 Canadian Reporting by Wojtek Dabrowski; editing by Peter Galloway

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