Corning: improved 2Q and 3Q LCD volume performance

At the end of June 2009, Corning Incorporated vice chairman and CFO James B. Flaws updated the company“s guidance of second-quarter LCD glass volume growth, referring to important improvement in LCD …

At the end of June 2009, Corning Incorporated vice chairman and CFO James B. Flaws updated the company“s guidance of second-quarter LCD glass volume growth, referring to important improvement in LCD glass demand. Second-quarter glass demand is much stronger than we anticipated even a few weeks ago, Flaws reported. As a result, we now expect second-quarter sequential volume to be up approximately 100% at our wholly owned business. He noted that the company has met a great deal of the improved demand by drawing down its existing inventory. Moreover, the company has also begun shipping glass from melting tanks that were restarted earlier in the quarter. Corning had originally forecast an increase of more than 50% in second-quarter volume, and revised volume growth expectations to more than 75% at the end of May. Second-quarter sequential glass volume for Samsung Corning Precision Glass Co., Ltd. (SCP) is expected to increase about 50%, up from the more than 40% figure announced in May 2009, and the more than 25% growth originally expected. Flaws pointed out that, in the first quarter, SCP“s volume did not decline as much as Corning“s wholly owned business. Speaking about LCD glass pricing, Flaws said that second-quarter prices were moderate and substantially below first-quarter price decreases. As we exit this quarter, Flaws added, our model indicates that the industry“s second-quarter supply chain inventory is equivalent to inventory levels at the beginning of this year. We see this as a positive sign. Industry growth required a supply-chain expansion after the significant contractions we saw in the first quarter. As we go forward, we expect some further supply-chain expansion as the industry prepares for the seasonally stronger fourth quarter. Flaws said that continued demand for LCD televisions in the retail sectors is helping to prevent excessive build-up of inventory. He noted that various industry reports on retail data demonstrated that in April 2009 LCD TV unit sales increased 22% in Europe, and 77% in China. In May, LCD TV sales grew 48% in Japan. While retail LCD TV sales growth in the United States had slowed somewhat in April after a very strong first quarter, reports that we have received indicate a significant upward spike in domestic LCD TV sales in late May and the first three weeks of June, Flaws noted. The company has not changed its 2009 forecast that the global LCD glass market will be between 2.1 billion and 2.2 billion sq.ft., But given the continued strong demand for LCD TVs in recent months, especially in China, we believe there could be an upside to this forecast, Flaws said. We will continue to monitor retail trends and provide any updates in our second-quarter conference call. Looking ahead, Flaws said that Corning expects its third-quarter LCD glass shipments to be consistent with the improved forecast for the second quarter. We significantly reduced our inventories in the second quarter to meet the increased needs of our customers. We also are strategically restarting capacity in response to some of the improved market demand. However, we expect to be capacity constrained in the third quarter as demand will remain higher than our ability to manufacture. According to Flaws, as a result, Corning is prioritizing its glass allocation to its customers with long-term supply agreements. It is important to point out that our initial forecast of third-quarter glass shipments called for moderate sequential growth. This assumption was made off a much lower second-quarter growth rate than what has occurred. We now believe that third-quarter shipments will be on par with our significantly improved second-quarter results, he added. LCD glass volume at SCP for the third-quarter is also expected to be consistent with the stronger-than-expected second-quarter results. The company expects third-quarter glass pricing to be quite flat versus the second quarter at its wholly owned business and SCP. It is far too soon to forecast fourth-quarter performance, Flaws said, but if retail demand for LCD TVs continues to be stronger than forecasted, we could see a more muted seasonal decline for LCD glass demand. Corning also announced that its second-quarter financial results will be release during a second-quarter conference call and webcast at 8:30 a.m. on Monday, 27 July 2009 before the financial market openings. Details will be posted on the company website at the investor relations page, http://www.corning.com/investor_relations.