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Corning expects strong LCD glass demand in 2Q09

Post Time:Apr 29,2009Classify:Company NewsView:444

Corning has announced that revenues for the first quarter of 2009 declined 9% sequentially to US$989 million, but it expects that continued strengthen in the LCD TV market will boost glass demand in the second quarter.

"It was satisfying to see the continued strength of LCD TV sales at retail worldwide throughout the first quarter," said Wendell P Weeks, chairman and CEO of Corning. "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."

Corning's first-quarter gross margin was 27%, slightly lower than fourth-quarter gross margin of 28%.

Sales in the display technologies segment were US$357 million, down 8% sequentially. Sequential price declines were significant, but Corning said they were 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 US$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 US$110 million, down 14% sequentially, mirroring the difficulties experienced in the global automotive industry and continued weakness in heavy-duty diesel sales in the US.

Display technologies combined LCD glass volume, including Corning's wholly owned business and Samsung Corning Precision Glass (SCP), increased 4% sequentially. Volume in the company's wholly owned business was down 1% sequentially, while SCP's volume was up about 7%.

Corning's equity earnings were US$195 million, down significantly from last year's fourth-quarter equity earnings of US$288 million. Equity earnings from Dow Corning were US$5 million, an appreciable decline from the fourth quarter. First-quarter equity earnings from Dow Corning include US$29 million in restructuring charges. SCP's equity earnings contribution was US$187 million, down 2% versus 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 Flaws, company vice chairman and CFO, 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," he continued, "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 two 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 versus 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.

Corning expects 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, Flaws noted.

He pointed out that Corning acted decisively to resize the company's cost structure in line with US$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."

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."

Corning 1Q09 results

 

1Q09

4Q08

Q/Q

1Q08

Y/Y

Net sales (US$ million)

989

1,084

(9%)

1,617

(39%)

Net income (US$ million)

14

249

(94%)

1,029

(99%)

Non-GAAP net income (US$million)

150

208

(28%)

702

(79%)

GAAP EPS

0.01

0.16

(94%)

0.64

(98%)

Non-GAAP EPS

0.10

0.13

(23%)

0.44

(77%)

Source: Company, compiled by Digitimes, April 2009

Source: DIGITIMESAuthor: shangyi

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