Buoyed by LCD Sales, Corning Reports $646M Profit
CORNING, N.Y., Jan. 25, 2007 -- Citing tremendous growth in glass sales for LCD TVs, Corning Inc. yesterday announced a fourth-quarter profit of $646 million, or 41 cents per share, and said the strong sales of its glass substrates would continue in 2007.
"Our excellent fourth-quarter results capped an outstanding full-year performance for Corning," said Wendell P. Weeks, president and CEO, in a statement. "This was the fourth consecutive year that we recorded significant improvement in the company's profitability and we reached a new all-time record for net income and earnings per share."
Corning, a maker of glass, fiber optics and specialty materials, said its fourth-quarter sales increased 7 percent over the third quarter and 14 percent over last year's fourth-quarter sales, which totaled $1.2 billion. Overall, sales for the year totalled $5.2 billion, an increase of 13 percent over 2005, which the company mainly attributed to strong growth in its Display Technologies business segment. The company's net income for 2006 was $1.86 billion. Excluding one-time gains and charges, Corning said its net income for 2006 increased 35 percent over 2005, to $1.78 billion.
Fourth-quarter sales for Corning's Display Technologies segment were $619 million, a 19 percent increase over 2005's fourth-quarter total of $518 million. The company said the segment's 48 percent growth was able to partially offset declines in LCD prices.
"Our Display Technologies business had an excellent year. Volume grew more than 50 percent on strong shipments of larger-generation glass substrates. We are especially pleased that we held our gross margin percentage in 2006 compared to 2005 as strong cost reductions offset price declines that were higher than our historical trend," Weeks said.
Total LCD glass volume, including both Corning's wholly owned business and Samsung Corning Precision Glass Co., Ltd. (SCP), increased 46 percent year-over-year. Corning owns half of SCP, a company in Korea that manufactures LCD glass substrates. Net income for the Display Technologies segment, which includes results of Corning's wholly owned business and equity earnings from SCP, increased 25 percent to $461 million in the fourth quarter compared to $368 million in the fourth quarter of 2005, and 17 percent compared to the third quarter.
Weeks said, "As the year went on it became apparent that television was becoming the primary driver for LCD glass growth. We estimate that LCD television penetration reached 22 percent of the world market in 2006, and preliminary retail sales figures indicate that one out of every three TVs sold in the United States last year was an LCD television.
"Greater than one-third of the total LCD glass manufactured last year, measured in square footage, was used to produce LCD televisions," Weeks said.
Fourth-quarter Telecommunications segment sales were down 11 percent to $404 million from $456 million in the third quarter, but the decline was less than the company had expected due to strong demand from European and North American telecommunications carriers, Corning said. It expects the demand to continue into the first quarter of 2007.
"We are beginning to feel much better about the growth opportunities in the telecommunications industry," said James B. Flaws, Corning vice chairman and CFO. "We expect to see earnings improvement for the full year."
"Year-over-year, our Telecommunications segment experienced sales gains of 6 percent. Excluding the impact of the shift of our Japanese business to an equity affiliate, sales increased 10 percent. The Telecommunications segment also improved profitability, before special items, for a second consecutive year. We sense that a broader recovery in the Telecommunications industry may finally be underway," Weeks said.
For 2007, Corning expects the overall LCD glass substrate market to grow in the mid-30 percent range, with an increase of at least 400 million sq ft of glass over last year's total volume. The expected volume growth for the year will be equal to or greater than the total amount of LCD glass added to the market in 2006. Corning said that its LCD glass volume is expected to grow at the upper end of this range, while SCP's volume may be slightly lower than the range. Growth rates by region will depend on local market dynamics, the company said.
Corning said that LCD televisions should reach 33 percent of the global television market or approximately 68 million units in 2007. This would be a significant increase over the estimated 22 percent penetration rate, or 43 million units, produced last year.
"This nearly 60 percent increase in television units produced, coupled with an increase in average screen size, may result in almost half of all the LCD glass produced this year going to the television market," Flaws said.
For the first quarter of 2007, Corning said it expects glass volume for its Display Technologies segment and SCP to be down 10 to 15 percent compared to the fourth quarter of 2006.
"This sequential volume decline reflects the seasonality of the LCD TV market as television becomes a larger part of the LCD industry. Historically, the color television end market has seen 55 percent of total sales occur in the second half of the year. Retail sales of LCD televisions are more weighted in the second half due to the rapid increase in penetration," Flaws said.
"We anticipate that this seasonality decline may fall more heavily on Corning in quarter one due to our overall market share and our new pricing strategy. We expect to see our total glass volume increase significantly as the market expands in the second half of this year. Additionally, we are encouraged that the LCD industry appears to be operating at lower levels during the first quarter in order to avoid a repeat of last year's panel inventory buildup which caused significant disruption in the LCD supply chain," he said.
The company said it expects price declines of one or two percent in the first quarter.
Corning said it expects to see see significant growth in its heavy-duty diesel products this year due to new US emissions regulations. Diesel products are a part of its Environmental Technologies segment. The company expects that diesel product sales should increase by more than 60 percent over 2006's $164 million, with stronger sales in the second half of the year.
For the first quarter of 2007, the company said sales for the Life Sciences segment should be up slightly from the fourth quarter of 2006.
For more information, visit: www.corning.com
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