For 2007, Corning expects the overall LCD glass substrate market to grow in the mid-30% range, with an increase of at least 400 million square feet of glass over the total volume for 2006. The expecte…
For 2007, Corning expects the overall LCD glass substrate market to grow in the mid-30% range, with an increase of at least 400 million square feet of glass over the total volume for 2006. 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 growth at Samsung Corning Precision (SCP), a 50-% owned equity company in Korea which manufactures LCD glass substrates, may be slightly lower than the range. Growth rates by region, and thus by Corning“s wholly owned business and SCP, may be different based on market dynamics. Corning said that LCD televisions should reach 33% of the global television market or approximately 68 million units in 2007. This would be a significant increase over the estimated 22% penetration rate or 43 million units produced in 2006. “This nearly 60% 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,” said James B. Flaws, vice chairman and chief financial officer. Corning said that it expects 1Q 2007 sales to be in the range of USD 1.26 billion to USD 1.31 billion and earnings per share (EPS) in the range of USD 0.24 to USD 0.27, before special items (non-GAAP financial measure). The gross margin percentage for the 1Q 2007 is expected to be 43% to 45%. The company also expects that its effective tax rate for the 1Q will be in the range of 15% to 18%. In its Display Technologies segment, Corning said that 1Q sequential glass volume for both its wholly owned business and Samsung Corning Precision will be down 10% to 15% compared to the 4Q. Mr. Flaws said, “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% of total sales occur in the 2H of the year. Retail sales of LCD televisions are more weighted in the 2H due to the rapid increase in penetration”. “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 2H of this year. Additionally, we are encouraged that the LCD industry appears to be operating at lower levels during the 1Q in order to avoid a repeat of last year“s panel inventory buildup which caused significant disruption in the LCD supply chain”. Price declines of 1% to 2% are expected in the 1Q for Corning“s wholly owned business. At SCP, 1Q price declines are anticipated to be higher and any subsequent declines are expected to be moderate for the remainder of the year. Mr. Flaws said there are a number of factors contributing to Corning“s overall belief that it will be able to achieve lower price declines this year than in 2006. “First,” he said, “last year“s 1Q inventory buildup by panel manufacturers and the subsequent inventory correction, along with the introduction of significantly more Gen 6 and larger capacity by competitors, were major contributors to the higher than historical price declines in 2006. Second, we are using a new pricing strategy by offering lower price declines in the first part of the year, when demand is seasonally weaker, in order to maintain higher prices in the 2H of the year, when we believe that LCD glass will be in tight supply”. Corning said that lower first-half capacity requirements will allow the company to make necessary melting tank repairs and improvements and accelerate its transition to its environmentally green EAGLE XG(TM) glass composition. Corning“s Telecommunications segment 1Q sales are expected to increase modestly over the previous year and sequentially due to increased demand in North America and Europe. “We are beginning to feel much better about the growth opportunities in the telecommunications industry,” Mr. Flaws said, “We expect to see earnings improvement for the full year.” Equity earnings for the 1Q are expected to decline 25% to 30% due to the lower earnings from Samsung Corning Precision and the absence of the 4Q nonrecurring gain at Samsung Corning. “Seasonality factors across a number of our businesses will have an impact in the 1Q but we believe that Corning is well-positioned to achieve another full year of sales and earnings growth. At the same time, we will continue to make the necessary investments in innovation and research that should lead to the next generation of successful products to ensure the long-term success of Corning,” Wendell P. Weeks, Corning president and chief executive officer said.