Corning has announced its results for the third quarter of 2011.
"We had a very respectable quarter with all of our segments showing double-digit percentage sales growth over last year," said Wendell P Weeks, chairman, CEO and president. "Our results were in line with the revised forecast we provided in September, when we first explained that LCD glass volume would be lower than expected as a result of a slowing in panel maker utilization rates and some share loss at SCP."
Weeks added, "We saw particularly robust performance in our Telecommunications segment with strong year-over-year growth in all product lines. Global demand for optical fiber remains healthy." Weeks said that the business fundamentals in Corning's core markets remain solid, "We firmly believe that we are well positioned to achieve our goal of becoming a US$10 billion company within the next several years."
Sales in the Display Technologies segment were US$815 million, a 7% sequential and 26% on-year increase. Price declines in the quarter were in line with the company's expectations. Segment results also benefited from a stronger Japanese yen.
"The display supply chain experienced a contraction in the third quarter as demand for LCD TVs remained strong worldwide while panel makers ran at lower utilization rates, especially in Korea. We believe the supply chain exited the third quarter with about 14 weeks of inventory, which is a level we have not seen since early 2009. The inventory contraction is a major factor in Corning revising its estimate of the worldwide glass market to 3.2 billion square feet for the year," said James B Flaws, vice chairman and CFO.
Telecommunications segment sales were US$560 million, an increase of 2% sequentially and 21% on year. Sales of enterprise network products increased 9% and FTTH sales increased more than 30% on year.
Environmental Technologies segment sales were US$247 million, a slight decline sequentially, but a 19% on-year increase.
Specialty Materials segment sales were US$299 million, an increase of 6% sequentially and nearly 90% over 2010. The business continues to benefit from extremely strong market acceptance of its industry-leading cover glass, Corning Gorilla Glass, for handheld devices, tablets, and notebooks.
Life Sciences segment sales of US$153 million were consistent sequentially and increased 22% on year. Recent acquisitions contributed significantly to the sales increase.
Corning's equity earnings were US$324 million, a decrease of 24% sequentially and 36% on year. The decline was driven by lower LCD glass volumes at SCP and lower demand for Dow Corning Corporation's silicone products.
Gross margin for the quarter was 47% versus 44% in the previous quarter. The margin improvement was driven in part by strong operating performance in both Display Technologies and Specialty Materials business segments.
The company expects LCD glass volume at its wholly owned business to be even or slightly down compared to the previous quarter. Glass volume at SCP is expected to increase at least 20% sequentially due primarily to the business regaining share lost in the previous quarter and higher panel maker utilization rates. The company also expects pricing pressure at both its wholly owned business and SCP to be more significant in the fourth quarter than in previous quarters.
"We believe the Korea-based panel makers will run at higher utilization rates in the fourth quarter, which is typically a period of significant seasonal retail demand. Panel maker utilization rates outside of Korea will vary, but in aggregate will be comparable to the third quarter," Flaws commented.
"The display industry faced an unusual market dynamic in 2011. Retail demand for LCD products continues to be stronger than actual LCD glass demand. Retail demand should be up about 13% for the year. This gives us confidence that when the supply chain correction ends, glass demand will resume growth more in line with retail performance," he said.
In the Specialty Materials segment, Corning anticipates fourth-quarter sales declines of about 15%, reflective across all product lines including Gorilla Glass.
Corning expects equity earnings to be down about 5% sequentially. The decline will be the result of lower earnings at Dow Corning, where demand for silicone products has slowed significantly. Dow Corning's Hemlock Semiconductors business may be negatively impacted by declining demand in the solar market.
Finally, Flaws pointed out that Corning remains confident about its long-term business prospects and its good financial health. He noted that the company recently increased its quarterly common stock dividend, in line with its performance as a consistent cash generator, and authorized a US$1.5 billion stock buyback program. Flaws said "The board's decision to repurchase shares reflects our belief that the long-term value of our businesses is substantially greater than our current share price."
Source:digitimes