Apple’s Supplier, Jabil Circuit Reports Weak 4th Quarter Performance

Apple’s Supplier, Jabil Circuit Reports Weak 4th Quarter Performance

Jabil Circuit, Inc. (NYSE:JBL), a Florida-based electronics supplier to Apple Inc. (NASDAQ:AAPL),  reported a weak financial performance during the fourth quarter of 2012. The company’s net income was $82.8 million or 39 cents per share, a 28 percent decline, compared with its $114.3 million net income or 52 cents per share during the same period a year ago.

Apple's Supplier, Jabil Circuit Reports Weak 4th Quarter Performance

The company’s profit, excluding some costs, was 54 cents per share. The result was 4 cents short of the average estimate based on the data compiled by Bloomberg.

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One of Jabil Circuit, Inc. (NYSE:JBL)’s largest clients is Apple Inc. (NASDAQ:AAPL). The company supplies aluminum casings for the iPhone 5. According to analysts, the company’s profit decline indicated signs of weakening margins in manufacturing aluminum casings for the Cupertino-based company’s latest iPhone product. The company generates 10 percent of its sales from Apple Inc. (NASDAQ:AAPL).

Aside from Apple, Jabil Circuits also generated 10 percent sales from Cisco Systems, Inc. (NASDAQ:CSCO) and Research In Motion Limited (NASDAQ:RIMM).

The company reported $4.34 billion in revenue, a 1.4 percent increase during the fourth quarter of the current fiscal year. The result beat the $4.22 billion consensus expectation from analysts.

The company’s operating income (GAAP) was $144 million, which was negatively affected by distressed customer charges of $5.9 million.

In a research note to investors, Goldman Sachs Group, Inc. (NYSE:GS) analyst, Graig Hettenbach, said he was disappointed on the fact that he missed the magnitude of the negative impact the ramp of the iPhone 5 would have on Jabil’s margins.

On the other hand, during an interview with Bloomberg, Sean Hannan, analyst at Needham & Co said, “Jabil has efficiency issues with the continued sharp ramp-up of the iPhone 5 production. Most suspect that Jabil is one of the important suppliers of the aluminum casing.”

In a statement, Jabil Circuits’ CEO, Timothy Main, said, “Results for the fourth quarter were negatively impacted by a challenging new program ramp in our Specialized Services sector. Additionally, demand remained weak in most of our business segments.”

During the full-year of 2012, Jabil Circuits gained market share in new customers, as well as new production contracts from its existing customers. The company experienced growth in its target markets, while most companies tapered their business operations in the electronics industry.

Jabil Circuits generated $443 million cash flow from its operations during the fourth quarter of 2012, and $634 million during the whole year of 2012. The company returned a total of $136 million in capital to its shareholders through dividends and share buy backs.

Forbes Alexander, chief financial officer of Jabil Circuits, projected the company will achieve $1 billion operating cash flow for 2013. The company estimated its profit for the first quarter of 2013 will be in the range of 51 cents to 62 cents per share, below the consensus estimate of Wall Street analysts.

Shares of Jabil Circuit, Inc. (NYSE:JBL) dropped by almost 10 percent, to $18.98 per share during the afternoon trading at the New York Stock Exchange on Wednesday.

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