As Americans slow their purchases of flat-screen televisions, Corning Inc. scaled back its forecast for the global glass market Wednesday and blamed a higher tax rate and an earthquake disruption in Japan for a 17 percent drop in second-quarter profits.
The specialty glass maker also lowered its 2011 sales forecast for Gorilla glass to $800 million from $1 billion. The ultra-strong cover glass is not migrating as quickly as expected from smartphones and tablet devices to high-end TVs with frameless screens, it said.
Its shares tumbled $1.25, or 7.2 percent, to close at $16.04 Wednesday. They're trading at the lower end of a 52-week range of $15.45 to $23.43.
While its revenue jumped 17 percent in the April-June quarter, the world's largest maker of liquid-crystal-display glass said its net income fell to $755 million, or 47 cents per share, from $913 million, or 58 cents, a year earlier.
Adjusted results narrowly exceeded expectations. Excluding items, earnings were 48 cents a share, a penny better than Wall Street analysts' average forecast.
Revenue jumped to $2 billion from $1.71 billion. Analysts expected $1.98 billion.
With TV-set makers in Japan and South Korea reducing their sales forecasts, Corning lowered its projection of how much LCD glass would be produced worldwide this year.
It now expects industry-wide volume to reach 3.3 billion to 3.4 billion square feet in 2011, up from 3.1 billion square feet last year. That's down from a previous forecast of 3.5 billion to 3.7 billion square feet.
"The display industry has been behaving more cautiously in recent weeks, driven primarily by weaker retail expectations for the second half," said Corning's chief financial officer, Jim Flaws. "We have seen most of the major television brands reduce their sales forecasts.
"In general, it appears the supply chain is waiting a little longer to build inventory for the seasonal pull of the fourth quarter," he added in a conference call with analysts.
The 159-year-old glass pioneer, based in western New York, saw year-over-year growth in four of its five business units _ from ceramic auto-pollution filters to research labware and specialty materials to optical fiber and cable.
The exception was Corning's display technologies segment, its biggest business by far, where sales fell 9 percent to $760 million.
Corning attributed the profit decline in the quarter largely to an increase in its tax rate to 14 percent from 3 percent last year and a temporary disruption in LCD-TV production at Sharp Electronics caused by Japan's earthquake and tsunami in March.
DisplaySearch estimates that 210.5 million LCD-TVs will be shipped worldwide in 2011, up 10 percent from 2010. But in North America, shipments are expected to rise just 2.6 percent to 39.3 million units. Three months ago, the market-research firm in Austin, Texas, projected a 5.8 percent jump in North American shipments.
In the United States and Europe, "a lot of the price declines that used to drive the sharp growth in the LCD category in the past really aren't materializing as much as this year," DisplaySearch analyst Paul Gagnon said.
In contrast, growth seen in emerging markets such as China, India and Eastern Europe is expected to remain vigorous as shoppers swap traditional cathode-ray-tube TVs for LCD TVs, he said.
While it commands more than 60 percent of the LCD glass market, Corning is also the world's largest producer of optical fiber and cable. It employs 26,000 people.
Revenue in Corning's telecommunications unit jumped 24 percent to $548 million on higher demand for optical fiber worldwide and fiber-to-the-home products in North America and Europe.
Propelled by robust sales of Gorilla glass for mobile devices, specialty materials revenue more than doubled to $283 million.
But Corning now expects Gorilla glass sales for TVs to reach just $50 million this year, far short of a $250 million target. So far this year, just one TV manufacturer, Sony Corp., has incorporated Gorilla glass in higher-priced Bravia TV sets.
Invented in 1962, Gorilla found commercial use only in 2008 and sales surged to $250 million in 2010. LG Display Co. and Asahi Glass Co. make competing products.
Environmental technologies revenue jumped 40 percent to $258 million, driven by robust demand for auto-pollution filters.
Life-sciences revenue rose 24 percent to $155 million, reflecting Corning's acquisition of Axygen BioScience Inc. as it shifts beyond a heavy focus on display glass. It bought the maker of plastic labware and liquid handling products for research labs for about $400 million in September 2009.