Corning (GLW) Plans to Reduce Capacity, Issues Lowered Guidance
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Corning Incorporated (NYSE: GLW) Senior Vice President and Corporate Controller Tony Tripeny will update investors at the Credit Suisse Annual Technology Conference in Scottsdale, Ariz., today (1:30 p.m. ET) on the company’s 2011 fourth-quarter performance, including its Display Technologies segment and views on the overall LCD glass market.
Corning will also provide an update on its fourth-quarter guidance. “We disclosed in our third-quarter earnings call that we expected to regain lost market share in Korea in the fourth quarter. We significantly reduced LCD glass pricing during the quarter to compress our pricing premium, in light of the current state of glass over-supply in the industry. We believed these actions would result in the return of share at a major customer in Korea, in line with the terms stated in our long-term supply contract with them. However, following initial positive reactions, including higher shipments in October and early November, this customer recently informed us that they do not expect to honor the contract for the remainder of the quarter. As a result, Samsung Corning Precision Materials Co., Ltd. is not expected to reach its volume targets in Korea,” Tripeny will say.
He will also add that Corning expects SCP’s LCD glass volume to be up 5% to 10% sequentially versus original guidance of more than 20% volume growth. The company’s combined LCD glass volume, which includes both its wholly owned business and SCP, is now expected to be up slightly sequentially versus previous guidance of up more than 10%. Additionally, he will explain that LCD glass price declines are expected to be more significant in the fourth quarter. As a result, consolidated equity earnings are expected to be down 30% versus original guidance of down 5%.
Corning also will announce that it is taking action in the fourth quarter to reduce its glass capacity. "While we expect worldwide glass demand to increase sequentially this quarter, we still believe there will be excess glass capacity. As a result, it is prudent for us to reduce capacity at both our wholly owned business and SCP. At our wholly owned business these actions will include delaying the start up of new glass melting tanks, as well as postponing the relighting of tanks that are down for repair. There will be no special charges in the fourth quarter as a result of these actions," Tripeny will explain.
Samsung Corning Precision plans similar actions to reduce capacity, as well as shutting down several glass melting tanks. The latter will likely result in one-time charges at SCP, primarily related to accelerated depreciation. Corning’s share of these charges is estimated to be in the range of $25 million to $50 million in the fourth quarter.
The combined actions at both Corning's wholly owned business and SCP will reduce the company's total worldwide capacity by approximately 25% by the end of the fourth quarter.
“We have made these decisions to adjust our glass capacity in an effort to match market demand. These actions have also taken into account our capacity needs for Corning Gorilla Glass demand,” Tripeny will add.
The company will also be lowering its Gorilla Glass sales forecast for the fourth quarter to a 25% sequential decline, compared to its original forecast of a 15% sequential decline. The revision is due to lower worldwide demand for cover glass for tablet computers. The company will have no other changes to its fourth-quarter forecast.
Corning will also provide an update on its fourth-quarter guidance. “We disclosed in our third-quarter earnings call that we expected to regain lost market share in Korea in the fourth quarter. We significantly reduced LCD glass pricing during the quarter to compress our pricing premium, in light of the current state of glass over-supply in the industry. We believed these actions would result in the return of share at a major customer in Korea, in line with the terms stated in our long-term supply contract with them. However, following initial positive reactions, including higher shipments in October and early November, this customer recently informed us that they do not expect to honor the contract for the remainder of the quarter. As a result, Samsung Corning Precision Materials Co., Ltd. is not expected to reach its volume targets in Korea,” Tripeny will say.
He will also add that Corning expects SCP’s LCD glass volume to be up 5% to 10% sequentially versus original guidance of more than 20% volume growth. The company’s combined LCD glass volume, which includes both its wholly owned business and SCP, is now expected to be up slightly sequentially versus previous guidance of up more than 10%. Additionally, he will explain that LCD glass price declines are expected to be more significant in the fourth quarter. As a result, consolidated equity earnings are expected to be down 30% versus original guidance of down 5%.
Corning also will announce that it is taking action in the fourth quarter to reduce its glass capacity. "While we expect worldwide glass demand to increase sequentially this quarter, we still believe there will be excess glass capacity. As a result, it is prudent for us to reduce capacity at both our wholly owned business and SCP. At our wholly owned business these actions will include delaying the start up of new glass melting tanks, as well as postponing the relighting of tanks that are down for repair. There will be no special charges in the fourth quarter as a result of these actions," Tripeny will explain.
Samsung Corning Precision plans similar actions to reduce capacity, as well as shutting down several glass melting tanks. The latter will likely result in one-time charges at SCP, primarily related to accelerated depreciation. Corning’s share of these charges is estimated to be in the range of $25 million to $50 million in the fourth quarter.
The combined actions at both Corning's wholly owned business and SCP will reduce the company's total worldwide capacity by approximately 25% by the end of the fourth quarter.
“We have made these decisions to adjust our glass capacity in an effort to match market demand. These actions have also taken into account our capacity needs for Corning Gorilla Glass demand,” Tripeny will add.
The company will also be lowering its Gorilla Glass sales forecast for the fourth quarter to a 25% sequential decline, compared to its original forecast of a 15% sequential decline. The revision is due to lower worldwide demand for cover glass for tablet computers. The company will have no other changes to its fourth-quarter forecast.
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