- THE MAGAZINE
Corning Inc. recently announced results for the first quarter of 2009, as well as its expectations for the second quarter. Sales were $989 million, a 9% decrease sequentially, while earnings per share (EPS) were $0.01. Excluding special items, EPS were $0.10, down 23% sequentially. Display Technologies’ combined LCD glass volume, including Corning’s wholly owned business and Samsung Corning Precision Glass Co., Ltd. (SCP), increased 4% sequentially. Volume in the company’s wholly owned business was down 1% sequentially, while SCP’s volume was up about 7%.
Gross margin for the 2009 first quarter was 27%, slightly lower than fourth-quarter 2008 gross margin of 28%. Corporate restructuring charges were $165 million pretax and in line with expectations.
“We were very pleased with our first quarter performance given the high level of economic uncertainty we were facing,” said Wendell P. Weeks, chairman and chief executive officer. “The biggest questions we had coming into the first quarter were, first, would the strong LCD TV sales rate continue in this tough environment, and second, when would the display supply chain contraction end? It was satisfying to see the continued strength of LCD TV sales at retail worldwide throughout the first quarter. We were also pleased to see demand for our glass pick up sooner than we anticipated, an indication that the display supply chain contraction was ending. These contributed to stronger-than-expected sales and earnings performance this quarter.”
Sales in the Display Technologies segment were $357 million in the 2009 first quarter, down 8% sequentially. Sequential price declines were significant, but in line with the company’s expectations. Positive foreign exchange rate movements basically offset the slight volume decline in the wholly owned business.
Telecommunications segment sales were $385 million, down 5% sequentially. Stronger optical fiber, cable and private network demand in China was offset by lower private network, cable, and hardware and equipment sales in North America.
Environmental Technologies segment sales were $110 million, down 14% sequentially, mirroring the difficulties experienced in the global automotive industry and continued weakness in heavy-duty diesel sales in the U.S.
Corning’s equity earnings were $195 million, down significantly from last year’s fourth quarter equity earnings of $288 million. Equity earnings from Dow Corning Corp. were $5 million, an appreciable decline from the fourth quarter. First quarter equity earnings from Dow Corning include $29 million in restructuring charges. Samsung Corning Precision’s equity earnings contribution was $187 million, down 2% vs. the fourth quarter of last year. Volume gains were more than offset by price declines, which were higher than Corning’s wholly owned business.
James B. Flaws, vice chairman and chief financial officer, said, “While economic uncertainty remains, we are expecting strong growth in display as our customers continue to ramp their capacity to match end market demand. We anticipate sequential volumes at our wholly owned business to be up more than 50% and up more than 25% at SCP. Therefore, we foresee relighting several of our glass melting tanks sooner than planned.
“With increased volume and manufacturing capacity, we should see considerable improvement in both the display segment’s and the company’s gross margins in the second quarter.” He noted that up through the end of the first quarter, Corning used existing inventory to meet the increase in glass demand. The company expects second quarter glass price declines at both its wholly owned business and SCP to be much more moderate compared to the first quarter.
The company has increased its estimate for the 2009 LCD glass market from 2 billion square feet to a range of 2.1 billion to 2.2 billion square feet. The change was driven by stronger-than-anticipated demand for LCD TVs, offset slightly by weaker-than-expected demand for notebook computers. The company now expects LCD TV units to grow 18% this year vs. its original expectation of 9%.
Corning expects modest sequential growth in its other business segments in the second quarter. Also, Dow Corning has seen improving monthly sales, which could lead to notably better results for its earnings.
Flaws reminded investors that the company is not providing specific sales or earnings guidance for the second quarter. “However, we expect to see significant sequential improvement in the company’s sales, gross margin, and earnings before special items. Second quarter results will also benefit from our recently completed fixed cost reduction programs,” he said.
He pointed out that Corning acted decisively to resize the company’s cost structure in line with $5 billion in sales this year. “As we said previously, if we do not see continued growth into the second half of this year, we will consider taking further corporate-wide restructuring actions to improve profitability.”
In concluding his comments, Flaws said, “We are encouraged by the early market interest and growth opportunities for some of our recent product innovations. A good example is Gorilla™ glass, our durable glass for touch screen and electronic applications. Gorilla glass has already been designed into 20 different electronic devices, including both cell phones and notebook computers, from more than seven separate manufacturers. We believe Corning has the right product mix and is well-positioned in core markets to seize the upside when economic growth returns.”
Visit www.corning.com for additional information.