Corning 2Q profit falls sharply, but exceeds Wall Street forecast

Corning 2Q profit skids, but beats forecast

ROCHESTER, N.Y. — Corning Inc. said Monday its second-quarter earnings skidded to $611 million from results inflated by a big one-time gain a year ago, but the specialty glass maker still beat Wall Street expectations on resurgent demand for its flat-screen television monitors.

The company indicated, however, that glass shipments were expected to be “flat or up slightly compared to the very strong second-quarter level” in the third quarter.

The world’s largest maker of liquid-crystal-display glass said its profit amounted to 39 cents a share in the April-June period, down from $3.2 billion, or $2.01 a share, a year earlier when it recorded a one-time gain of $2.43 billion.

The latest earnings easily beat Wall Street’s forecast of 32 cents a share as glass prices rebounded.

Sales fell 18 percent to $1.4 billion from $1.69 million but also exceeded analysts’ forecasts of $1.36 billion.

Corning shares closed down 50 cents, or 2.9 percent, to $16.50,

The company told analysts its gross profit margins in the July-September quarter will be flat compared with the second quarter, “signaling potentially at least near-term that this is as good as it gets,” said Barclays Capital analyst C.J. Muse.

Sales in its display technologies segment fell 17 percent to $673 million from $809 million a year ago but surged 89 percent from $357 million in the first quarter.

DisplaySearch, a market-research firm based in Austin, Texas, estimates that about 127 million LCD-TVs will be shipped worldwide this year, up from 105 million in 2008. In North America, shipments were expected to edge up to 31.5 million from 30.1 million last year.

“One of the bright spots has been China, where the government is providing a lot of inventives to consumers to purchase home electronics like LCD-TVs,” said analyst Paul Gagnon.

“Even in North America, on a unit basis, demand has been pretty good. People seem to be gravitating toward more modest screen sizes, not the the ultra-large stuff, but the volume is there. TVs are one of those household electronics that tend to be high on everybody’s list for have-to-haves.”

Corning said LCD glass volume rose 66 percent from the first quarter, up from earlier predictions of 40-to-50 percent growth in the quarter. Volume doubled in its wholly-owned business and jumped 50 percent at its LCD glass joint venture with Korea’s Samsung Electronics Co.

Sales in Corning’s telecommunications unit fell 9 percent to $437 million from $477 million on weakened optical-fiber sales for private networks in North America.

Environmental technologies sales fell to $132 million from $209 million, hurt by weaker auto-pollution filter sales.

Corning uses a proprietary “fusion draw” process to create unvaryingly flat, chemically stable glass. Two sheets separated by a layer of liquid crystals are used to create the high-resolution monitors found in TVs, computers and digital phones as well as video cameras, Palm Pilots and medical-imaging devices.

Panel makers slowed their glass purchases dramatically at the end of 2008 to try and reduce a buildup in inventories as prices fell. In response, Corning took $165 million in first-quarter restructuring charges to pay for eliminating 3,500 jobs, or 13 percent of its payroll of 27,000.

“In retrospect, they didn’t need to crash down inventory,” James Flaws, Corning’s chief financial officer, said in an interview. “They harmed themselves and us for a period of time and it turned out that the retail demand for (LCD) televisions was fairly steady.

“In the first half of the year at retail, unit demand is up about 35 percent around the world.”

Corning raised its estimate of worldwide glass sales in 2009 to 2.3 billion square feet, up 15 percent from 2 billion square feet in 2008.

On the Net: www.corning.com