Corning Posts 6% Sequential Net Sales Gain for 3rd Qtr (posted 11/4/09)
Corning Inc. recently announced its results for the third quarter of 2009, as well as its expectations for the remainder of the year. Sales for the third quarter were $1.5 billion, up 6% sequentially. Display Technologies’ combined glass volume, including Corning’s wholly owned business and Samsung Corning Precision Glass Co., Ltd. (SCP), increased 4% over a very strong second quarter. Volume in the company’s wholly owned business was consistent with the second quarter, while SCP’s volume increased 7%. Glass pricing was comparable to the previous quarter.
“The improvement we have seen over the past two quarters has increased our optimism for the fourth quarter,” said Wendell P. Weeks, chairman and CEO. “Retail sales for LCD televisions remained strong throughout the third quarter, and we believe this will continue into the fourth quarter, which is typically the heaviest retail buying period. This demand has allowed the global LCD supply chain to maintain appropriate inventory levels.”
Sales in the Display Technologies segment were $679 million and slightly higher than the second quarter. Third quarter sales were impacted by an earthquake in Japan that affected production at the company’s LCD facility in Shizuoka in August. Display sales were positively impacted by foreign exchange rate movements in the quarter.
In the third quarter, Corning began volume shipments of Gen 10 glass substrates from its newest LCD glass manufacturing plant in Sakai City, Japan. Corning is reportedly the first manufacturer of TFT-grade Gen 10 substrates in the world.
Telecommunications segment sales were $450 million, an increase of 3% over the previous quarter. The segment saw continued strength in optical fiber sales in China, as well as strong demand for private network products in North America. The growth rate was impacted by a slowing of fiber-to-the-home demand in North America.
Environmental Technologies segment sales were $167 million, an increase of 27% sequentially, driven primarily by automotive product sales increases in the U.S., China, and Germany. Corning said the improved automotive product demand was likely the result of governmental incentives within these regions, including the now-ended U.S. “cash for clunkers” program, as well as diminished global inventory levels. The company also experienced strong demand for its heavy-duty diesel products due to manufacturers purchasing product ahead of new 2010 U.S. emissions regulations.
Specialty Materials segment sales were $90 million, a 27% increase over quarter two. The sales increase was due in part to the continued ramp-up in demand for Gorilla™ glass used in notebooks and portable electronic devices. Corning’s Gorilla glass is now used by 12 major brands and designed into more than 45 devices.
Life Science segment sales were $92 million, compared to $81 million in the second quarter. Third quarter sales included $7 million from Axygen Bioscience, Inc., which was recently acquired by Corning. It is expected that Axygen’s product portfolio and established distribution network will significantly strengthen Corning’s life sciences platform.
Corning’s equity earnings were $418 million, significantly higher than the second quarter’s equity earnings of $361 million. Equity earnings from Dow Corning Corp. were $92 million, an increase of 59% over the second quarter. Equity earnings from Samsung Corning Precision were $316 million, an increase of 7% sequentially.
“Although a portion of our glass production at the Taichung facility has been impacted by a power disruption, we remain confident that the strong performance in our display business over the last two quarters will continue in the fourth quarter of this year,” said James B. Flaws, vice chairman and chief financial officer. “At the same time, we expect to see normal seasonal declines in our Telecommunications and Environmental Technologies businesses.” He added that Corning expects equity earnings at Dow Corning to be higher compared to last quarter.
Corning expects glass volume in its wholly owned display business to be flat to down slightly sequentially this quarter. At SCP, glass volume is expected to be consistent quarter-to-quarter. The company also anticipates glass pricing at both its wholly owned business and SCP to be consistent with the third quarter. Flaws noted that without the temporary loss of glass production from Taichung, Corning had expected a quarter-over-quarter volume increase of approximately 5%.
“In our Display segment, global retailers are expected to offer attractive pricing for LCD televisions, which is likely to result in continuing robust demand through the fourth quarter. This retail demand, along with our expectation that panel manufacturers may lower utilization rates later this quarter, should allow the industry to maintain healthy inventory levels and alleviate any over-supply concerns,” said Flaws.
The company anticipates its Telecommunications segment sales to be down 15%, due primarily to seasonally lower demand in North America. The company believes demand in China will remain strong. Environmental Technologies segment sales are expected to be down between 10% and 15% sequentially, reflecting normal seasonal declines and the expected drop in demand following the end of the U.S. incentive program. Specialty Materials segment sales are expected to be similar to the third quarter or down 5%, and Life Sciences segment sales are expected to be up 25%, driven by the Axygen acquisition.
The company anticipates that worldwide unit sales of LCD televisions next year could reach 156 million, a 20% increase over 2009. Additionally, computer notebook sales are forecasted to grow by about 20%, while desktop monitor sales are expected to increase about 4% for the year. “If these retail forecasts are correct and glass supply chain inventories remain manageable, as we expect, then next year could see very robust gains in worldwide glass volume,” said Flaws.
This demand is expected to result in a worldwide glass market of at least 2.7 billion square feet in 2010, an annual increase of approximately 15%. “We believe the amount of glass capacity that is currently being restarted by the industry is in line to meet these end market demand expectations,” said Flaws.
The company stated glass demand will likely vary quarter-to-quarter next year. “We believe panel makers may respond to the seasonal decline in demand by reducing utilization rates in the first quarter. As a result, we would also expect first quarter glass demand to be sequentially lower. Looking ahead to the second quarter, we would expect utilization rates at the panel makers to snap back as the supply chain expands to meet the seasonally stronger second half. In this environment, we would expect second quarter glass demand to also increase significantly,” said Flaws.
For additional details, including an archived conference call discussing these results, visit www.corning.com.