Corning‘s (NYSE:GLW) core sales rose by 10% annually to $2.1 billion and its core earnings rose by 17% annually to $487 million in the third quarter, driven by higher sales at its telecommunications segment and higher LCD glass shipment volumes. This was partially offset by moderate LCD price declines.  These core results exclude the impact from changes in the Japanese yen to U.S. dollar exchange rate, as well as the earnings from Dow Corning’s polysilicon business and other special items. The company moved to report its results in core parameters some quarters back, when the Japanese yen plunged sharply in value relative to the U.S. dollar. As a significant portion of Corning’s LCD glass and manufacturing costs are priced in yen, it moved to present its results on a constant yen-dollar exchange rate of around 93 yen to a dollar in order to provide for clearer comparison between periods.
We are in the process of incorporating the company’s third quarter earnings and its acquisition of Samsung Corning Precision in our analysis, and shall update the same shortly.
LCD Glass Business Stabilizes
In the third quarter, driven by higher average screen sizes of televisions, monitors and tablets, and higher unit sales, LCD glass shipment volumes from Corning’s wholly owned LCD glass business and Samsung Corning Precision increased in the low-teens on a year-over-year basis. Gains from this rise in shipment volumes were partially offset by moderate LCD price declines. Overall, the core sales at Corning’s LCD glass business, called Display Technologies, rose by 7% annually to $689 million.  Looking ahead, in the fourth quarter, the company anticipates its LCD glass volumes to be down in the low single digits on a sequential basis and LCD price declines to be moderate.
Separately, Corning recently also moved to acquire complete ownership of its joint venture with Samsung Display Co., called Samsung Corning Precision (SCP), which manufactures LCD glass substrates in Korea. As part of this deal signed between the two companies, Samsung Display will invest around $1.9 billion in Corning’s convertible preferred shares after redemption of its interest in SCP. As a result, Samsung Display will get around 7% ownership in Corning.  . For Corning, the complete ownership in SCP will allow it to sell LCD glass made from SCP’s manufacturing units in Korea to other customers apart from Samsung. This will result in significant synergies. Corning also signed a ten-year LCD glass supply agreement with Samsung Display under the same deal.
Apart from LCD glass, Corning’s telecommunications business, which manufactures optical fibers and telecom hardware, also posted strong growth in sales and profits in the third quarter. Sales and earnings at the company’s Specialty Materials segment which includes the business of Gorilla Glass also improved sequentially, while the acquisition of Discovery Labware, which makes laboratory equipment, propelled results in the Life Sciences segment.
Looking ahead, Corning anticipates its results to fall sequentially in the fourth quarter due to normal seasonal declines in its non-display businesses. The company said that this decline will be due primarily to falling optical fiber sales in North America and China, and slower than anticipated construction of the National Broadband Network (NBN) in Australia, which seeks to bring fiber-to-the-premises (FTTP) Internet connection to more than 90% of Australian homes. However, in the long term we figure that the company is well positioned for growth, driven by rising worldwide demand for consumer electronics and emerging market demand for network bandwidth.Notes:
- Corning’s 2013 Q3 earnings form 8-K, October 30 2013, www.corning.com [↩] [↩]
- Corning and Samsung strengthen strategic collaboration, October 22 2013, www.corning.com [↩]