Corning's 3Q profit rises 3 percent

AP News
Posted: Oct 26, 2011 6:12 PM
Corning's 3Q profit rises 3 percent

Corning Inc. said Wednesday its profit rose 3 percent in the third quarter, lifted by surging sales of optical fiber and glass for flat-panel televisions, smartphones and touch-screen tablets.

The results handily beat Wall Street expectations, and the specialty glass maker signaled that U.S. retail demand for liquid-crystal-display TVs has gathered pace in recent months and South Korean TV-panel makers are boosting glass production in the current quarter.

Its shares rose 41 cents, or 3 percent, to close at $14.13 Wednesday after rising as high as $14.94 earlier in the session. The stock has ranged from $11.51 to $23.43 in the past year.

While worldwide demand for LCD TVs is up 20 percent this year, previously sluggish U.S. sales climbed 10 percent in July and August and 13 percent in September, "which is actually the strongest growth rate we've seen all year," said Chief Financial Officer Jim Flaws.

"And for the first two weeks of October, sales in the U.S. are up 13 percent," Flaws said in a conference call with analysts.

The world's largest maker of LCD glass with more than 60 percent of the global market, Corning reported net income of $811 million, or 51 cents per share, in the July-September period. That's up from $785 million, or 50 cents per share, a year earlier.

Excluding special items, adjusted earnings were 48 cents per share. That was well above Wall Street expectations of 42 cents per share.

Revenue jumped 30 percent to $2.08 billion from $1.6 billion. Analysts expected $2.03 billion.

Sales of LCD glass bounded 26 percent higher in the quarter to $815 million, and sales of the telecommunications unit rose 21 percent to $560 million. Corning also saw double-digit growth in its other three units _ Gorilla cover glass, auto-pollution filters and research labware.

In recent quarters, a soft economy has been cutting into U.S. demand for flat-screen televisions and, as a result, for the glass that Corning makes. But the company did better in glass production this summer than it projected in early September.

Volume in its wholly owned business increased in the mid-single digits compared with the second quarter and fell more than 20 percent in its joint venture with South Korea's Samsung Electronics. The combined total glass volume fell about 10 percent sequentially.

However, Corning had warned that it expected volume in its wholly owned business to be level with the second quarter and volume in its joint venture to drop 30 percent.

"It's obviously a difficult economic environment and we're dealing with a difficult contraction in the supply chain in the second half," Flaws said. "But I'd remind people we're on pace to reach" a record $7.9 billion in sales this year and $10 billion by 2014.

DisplaySearch estimates 206 million LCD-TVs will be shipped worldwide in 2011, up 7.5 percent from 2010. But in North America, shipments are expected to fall 2 percent to 37.5 million units. Three months ago, the market-research firm from Austin, Texas, projected a 2.6 percent rise in North American shipments.

In the United States and western Europe, "the persistence of the recession is causing people to continue to focus" on low-end LCD-TVs even as manufacturers push "higher-end models that have step-up features," said DisplaySearch analyst Paul Gagnon.

"That is causing people to either look away from the TV market for a little while or wait for prices to get better, or perhaps spend those dollars on other hot consumer electronics categories ... like tablets and smartphones."

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, Gagnon said.

Propelled by ultra-strong Gorilla glass, which is now migrating from handheld and tablet devices to high-end TVs, specialty materials revenue swelled almost 90 percent to $299 million.

Three months ago, Corning lowered its 2011 sales forecast for Gorilla to $800 million from $1 billion. Invented in 1962, Gorilla found commercial use only in 2008 and sales surged to $250 million in 2010.

Environmental technologies revenue jumped 19 percent to $247 million, driven by robust demand for auto-pollution filters.

Life-sciences revenue rose 22 percent to $153 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.

Surging revenue in Corning's telecommunications unit was driven by a more than 30 percent increase in higher demand for fiber-to-the-home products in North America and Europe.