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In slower economy, more cautious Jabil Circuit still expects third record year

Published Jun. 20, 2012

jabilplantwuxicourtesyjabil.jpgWake up and good morning. One of Tampa Bay's most competitive and global companies -- Jabil Circuit of St. Petersburg -- just reported strong quarterly earnings. While acknowledging some rougher spots than usual in some of its businesses, Jabil said it still expects to achieve another record year, its third in a row. Here are some highlights of Jabil news from CEO Tim Main's chat with analysts:

* Jabil charged into the solar power industry to become a manufacturer of components. But now solar's expansion is slipping and Jabil said it would take a $10.1 million "distressed customer charge" tied to one struggling solar customer. The firm was not identified. Previous Bloomberg reporting indicates Jabil solar customers include BP plc and JA Solar Holdings.

* Jabil is expanding into its manufacturing into yet another Chinese city. What's of interest is that it is Chengdu, the capital of Sichuan Province that is deep in the interior of China and slated to have as much as 2 million square feet of capacity. What does this mean? CEO Main calls Chengdu a "cost hedge against coastal China" which suggests the costs of doing business (wages especially) in port cities of China are rising enough to justify Jabil's deep plunge into China's interior in search of lower costs. Jabil declined to say which customers will be served in that new facility.

* A big customer for Jabil, RIM (Research in Motion) -- maker of the Blackberry, is struggling, trying to cut $1 billion in expenses and thinning the ranks of its suppliers. Jabil says it will be one of those fewer suppliers and (though Jabil never identifies RIM, analysts refer to the company during the Jabil conference call). Jabil says it will consolidate production fort he customer in Mexico and Hungary.

Overall, Jabil said economic growth was slower than expected. Even robust industries like healthcare are growing at a lower rate. But Main expects the pace of business to pick up again in 2013.

"It goes without saying we are in an uncertain macro environment," Main told analysts Tuesday. "If we execute very well, I think we will do well in a macro environment that does not tip over." Read the transcript of Jabil remarks with analysts here.

Photo: Jabil's China plant in Wuxi. Courtesy of Jabil.

-- Robert Trigaux, Business Columnist, Tampa Bay Times