Corning's Profit Drops 39% on Weak Glass Prices
07/25/2012| 10:46am US/Eastern
--CEO warns of headwinds in Europe, China
--LCD glass price declines moderate in 2Q
--Stronger LCD glass volume expected in 3Q
Corning Inc.'s (>> Corning Incorporated) second-quarter profit dropped 39% as still-weak consumer demand hurt prices for its television-screen glass.
At the same time, the company predicted third-quarter glass volume would grow sequentially in the low double digits, driven by continuing demand for tablet computers and larger TV sizes. Glass-price declines will "remain moderate" in the current quarter, the company said.
Corning, which relies on sales of LCD TV glass for the vast bulk of its profits, warned earlier this year that price declines would persist, though it predicted the declines would moderate in the second quarter. Its exposure to the consumer-electronics market has pushed down profits for the past three quarters as the depressed TV market has kept a lid on component prices.
Chairman and Chief Executive Wendell Weeks said LCD-glass price declines moderated compared with earlier quarters, though weakening economic conditions in Europe and China created another cause for concern.
"We are alert to the fact that the economic woes may grow, and consumers may reduce their spending, which could impact our customers," Mr. Weeks said. "If we see further weakness, we will respond with appropriate actions."
The company delivered slightly more optimistic commentary about retail demand in the U.S., where sales of larger screens are helping pad revenue.
"Television sales have been positive in the U.S. every month so far this year, but we're not seeing any sentiment change so far," Chief Financial Officer Jim Flaws told Dow Jones Newswires.
The company earlier this year moved to diversify its revenue stream by paying about $730 million in cash to acquire the bulk of Becton Dickinson & Co.'s (>> Becton, Dickinson and Co.) lab-products business, snapping up a portfolio it said would significantly increase its presence in the life-sciences market.
Corning reported a profit of $462 million, or 30 cents a share, down from $755 million, or 47 cents a share, a year earlier. Excluding charges tied to absestos liability, per-share earnings fell to 31 cents from 48 cents as revenue slid 4.8% to $1.91 billion.
Analysts polled by Thomson Reuters were expecting a profit of 31 cents per share and $2.02 billion of sales.
Gross margin narrowed to 41.8% from 44.3%.
Earnings fell 42% in the display-technologies segment, which contains the LCD TV glass operations, as sales declined 16%. The smaller telecom, environmental-technologies and specialty-materials units all posted higher profits.
Corning shares slid 1% to $11.94. The stock has declined 16% over the past three months.
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