Despite Japan vulnerability, Jabil Circuit looking at breakthrough year of growth
Wake up and good morning. St. Petersburg's Jabil Circuit enjoyed a strong second quarter of growth and earnings but, as one of the area's most "global" companies with operations across Asia and Europe the electronics manufacturer can feel the pain when natural or man-made disasters hit. (See more on quarterly results here.)
In this case, it's Japan where Jabil operates out of a city called Gotemba. It's southwest of Japan so buffered from the disaster that hit the northern part of the country. Still, it was not enough.
"Our employees and site in Gotemba, Japan were not directly impacted by the natural disaster. However, many of our employees as well as suppliers were impacted. We extend our heartfelt condolences to those who have suffered losses as a result of this tragedy," said Jabil CEO Tim Main in a statement Tuesday.
(Photo: Jabil Gotemba employees shown in earlier times harvesting and selling fruits to Jabil employees. Proceeds from the fruit sales were used to buy wheelchairs donated to the Gotemba community. Photo courtesy of Jabil.)
In a slide show with analysts, Jabil presented a glowing quarterly report of robust growth almost across the board. But a few slides discussing what's ahead carried this statement in large red type: "Excludes the impact of potential supply chain disruption due to events in Japan." Jabil acknowledged the disruption from the earthquake and tsunami "may have an impact" on the supply of components to Jabil's global manufacturing operations. Said Main: "Some (Japanese) suppliers are simply scrambling to get their employees back to work, determine if and what level of damage has been done to their operations and when they can resume supply."
Even so, Jabil's feeling its oats -- despite confirming this month that it will lay off 90 workers at its St. Petersburg operations. Some highlights:
* If Jabil can manintain current momentum, it's possible we will finally see another Tampa bay based corporation start to approach the revenue size of Clearwater-based Tech Data Corp. the area giant in revenues with about $24 to $25 billion a year.
* Jabil CEO Main said his company is on track this yeart to end up with revenues of $16,4 billion. As Main told analysts: "I think it's interesting to note that if we applied the long-term growth targets onto that $16.4 billion... the company would reach a $20 billion revenue level by fiscal 2013." That's enormous growth.
* Second quarter revenue was $3.9 billion versus $3 billion a year ago. Net income was $55.4 million compared to $29.8 million for the same period of fiscal 2010.
* Jabil reacquired operations in France and Italy it had previously divested in July. Now it's cutting costs at those plants and trying to get those facilities up to Jabil levels of efficiency.
As for CEO Main (photo, right), it's been a great year, too. The Wall Street Journal recently reported that Jabil Circuit gave Main a $2.9 million bonus for its year ended Aug. 31. That's more than five times his $524,103 award the prior year. The board's pay panel chose possible bonus targets that it "believed were challenging yet attainable in an uncertain economic environment,'' said Adam Berry, director of investor relations for the maker of circuit boards and electronic components.
The award was based on higher core operating income and return on invested capital. Jabil Circuit posted profits of $169 million last year, swinging from a loss of $1.2 million the year before. But as the Journal notes, shareholder returns were -4.3 percent in the year ended Aug. 31, compared with 10.9 percent for the S&P 500 Index, according to Hay Group. Poor returns forced Main to forfeit most of his performance-based restricted shares.
All in all, Jabil's in the fast lane and may be on course for a breakthrough year of major growth.
-- Robert Trigaux, Business Columnist, St. Petersburg Times