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Celestica Inc. shares fell more than 12 per cent Friday after its fourth-quarter outlook disappointed analysts.

The shares fell $1.60 to $11.52 on the Toronto Stock Exchange, their biggest one-day decline in more than a year.

Celestica yesterday provided a forecast for the current fourth quarter, which ends Dec. 31, that was on the low end of analyst estimates.

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The company expects revenue in the range of $2.25-billion to $2.45-billion, and adjusted earnings per share to range from 15 cents to 23 cents per share. Analysts had been estimating that Celestica would have revenue of $2.32-billion and $2.52-billion and adjusted earnings of 16 to 26 cents.

Celestica chief executive Steve Delaney said the company had been aiming to improve the output and efficiency of its high-growth sites, benefit from some major new work from customers and raise Celestica's working capital and margins.

"We were able to make progress in each of these areas during the quarter but we have more work to do," Mr. Delaney told analysts in a conference call.

"From a profitability standpoint, improvements in both Mexico and Europe regions have been progressing slower than anticipated."

There have been improvements in Mexico's operational performance but "we continued to experience efficiency shortfalls caused by the growth and complexity introduced there," Mr. Delaney said.

Celestica's managers continue to work to stabilize its operations in Mexico and then work to optimize efficiency there, a process that Mr. Delaney said will likely take several quarters.

"Europe showed no improvement in operating earnings this quarter, over last (quarter), due to weaker demand in the region. Restructuring should help improve profitability in the fourth quarter," Mr. Delaney said.

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The company is entering the final stage of a major restructuring announced by Celestica in January 2005, one of several undertaken in recent years as it shifted more of its production capacity to low-cost regions from high-cost areas.

For the third quarter, Celestica had a net loss of $42.1-million (U.S.) as revenue rose 20 per cent, compared with a year earlier, to just under $2.4-billion, the global electronics manufacturing company announced Thursday.

Included in the loss was $82-million in charges associated with previously announced restructuring plans, which called for more than 5,000 job cuts and numerous plant closures, mostly in Western Europe, the United States and Canada.

Celestica, which reports in U.S. dollars, said its adjusted net earnings for the quarter were $40.5-million or 18 cents per share, compared to $27.1-million or 12 cents per share for the same period last year. The company had just under $2-billion in revenue in the third quarter of 2005.

The adjusted net earnings, which exclude a number of items that are included in net earnings under generally accepted accounting principles, are more widely watched by analysts than Celestica's GAAP earnings.

Analysts had estimated, on average, that Celestica would have 16 cents per share of adjusted net earnings and revenues of about $2.2-billion.

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The company itself had estimated in its previous guidance that it would have $2.15-billion to $2.35-billion in revenue in the quarter and adjusted net earnings of between 12 and 20 cents per share.

Celestica operates a global manufacturing network that makes information technology products for companies such as IBM Corp., Cisco Systems Inc. and others.

Three weeks ago, Celestica announced it had sold its operations in Vimercate, Italy to Bartolini Progetti SpA, which will provide certain services to Celestica on a subcontract basis.

About 850 employees at the Vimercate operations will become employed by Bartolini, the company added.

"The sale of our Italian site during the quarter gave us the opportunity to take out a significant portion of underutilized capacity in a high-cost geography," Mr. Delaney said, adding that its deal with Bartolini will still enable Celestica to meet its customers' needs.

As of Sept. 30, Celestica had released about 3,800 employees under the January 2005 restructuring program, which originally called for up to 5,500 job cuts over a 15-month period that would have ended early in 2006.

However, the restructuring has gone more slowly and proved to be more expensive than originally anticipated.

Celestica chief financial officer Anthony Puppi told analysts Thursday that the company has recorded $280-million of charges related to the restructuring, including $180-million cash paid to date.

The total restructuring program charge is now expected to cost $300-million by the time it's completed in early 2007, including about $240-million cash, he said.

"Upon completion of the restructuring, we continue to expect this program to generate approximately $150-million of annual cost savings. To date, we are running at approximately 75 per cent of that rate," Puppi said.

Celestica is part of Onex Corp., the Toronto-based conglomerate that owns companies in finance, health care, manufacturing, aerospace, technology and other sectors. Onex-controlled companies employ more than 138,000 people around the world and together generated revenues of more than $17.6-billion last year.

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