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‘Like Our Chances’

‘World’s a Tough Place,’ but Supply Chains ‘Getting Better’: Jabil CEO

Revenue in Jabil’s diversified manufacturing services (DMS) business, which includes automotive, connected devices and mobility products, increased 7% in fiscal Q3 ended May 31, said the contract manufacturer Thursday. That the revenue growth was about 10 points below Jabil’s March guidance shows the impact of the COVID-19 lockdowns in Shanghai and persistent component shortages, said CEO Mark Mondello on a quarterly earnings call.

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The world’s a tough place, and it’s a tough place for any large corporation,” said Mondello. “But I like our chances,” said the CEO. “We have some wonderful opportunities for ‘23 and ‘24 that have started to come through the P&L this year,” including in electric vehicles and personalized healthcare devices, plus retail automation and “enhancements” in connected devices, he said.

In guiding to 17% revenue growth in Q3's DMS business, “we certainly didn’t anticipate the length of time” of the Shanghai lockdowns, said Mondello. The shortfall also was due to “some challenges again with specific silicon that probably impacted us mostly on auto,” he said. There also were “shifts going on with volumes in mobility” that suppressed revenue growth in the quarter, he said. But “demand remains strong” in the DMS segment, he said. The stock closed 9.9% lower Thursday at $53.02.

Mondello continues to think “as a whole, across the company, our supply chain challenges are getting better,” said the CEO. “The overall supply chain is getting better,” he said. “When we think about supply chain, it’s not just semiconductors, it’s not just the last golden screw. We have everything from resins to metals in our precision machining to run the gamut in everything that we buy.”

In China, “when things do get shut down or things go bump in the night, we have enough residual capacity there, if you will, to make things up pretty quickly,” said Mondello. For Q4 ending late August, Jabil assumes its capacity in China “is going to run at about 80-85%,” he said. “Indications are that’s a good assumption set, and we’re not assuming things will be quite as difficult as they were in Q3.”