Corning Incorporated (NYSE: GLW) today announced its results for the first quarter of 2011.
“There are several key market trends that seem to be playing to Corning's strengths as we look to the future. These trends provide us with great opportunities across all our major businesses and position Corning to grow sales to more than $10 billion by 2014”
First-Quarter Highlights
- Sales were $1.9 billion, increasing 9% sequentially and 24% year over year.
- Earnings per share were $0.47. Excluding special items, earnings per share were also $0.47, a 2% sequential increase, but a 10% decline year over year.
- Display Technologies wholly owned business glass volume increased by upper-single digits sequentially, while volume at Samsung Corning Precision Materials Co., Ltd., improved slightly. The company's total glass volume, which includes its wholly owned business and SCP, increased 5% sequentially.
- Telecommunications sales increased 7% sequentially and 30% year over year.
- Specialty Materials sales jumped 29% sequentially and 165% year over year, driven primarily by Corning® Gorilla® Glass.
- Environmental Technologies sales improved 12% sequentially and 35% year over year.
Remarking on the strong first-quarter results, Wendell P. Weeks, chairman, chief executive officer and president, said, "We built on the momentum coming out of 2010 to deliver exceptional year-over-year performance from all of our business segments. Our volume across the display business remained strong. We continued to experience very healthy sales and exceptional market acceptance for Gorilla® Glass. Our telecommunications performance was robust and at levels we haven't experienced in a number of years, and the recovery in the heavy-duty diesel market has driven our diesel sales to record highs."
First-Quarter Segment Results
Sales in the Display Technologies segment were $790 million, increasing 5% sequentially and comparable to a year ago. Glass price declines in the quarter were more moderate than the previous quarter, as expected.
Telecommunications segment sales were $474 million, a 7% sequential increase and 30% year-over-year improvement. Sequential sales for the quarter increased across most of the segment's major product areas with significant demand for the company's fiber-to-the-home solutions. Corning noted that its optical fiber volume in March was higher than any other month in its history.
Environmental Technologies segment sales were $259 million, an increase of 12% sequentially and 35% year over year. The company saw record quarterly sales in diesel engine filters and increased automotive substrate sales.
Specialty Materials segment sales were $254 million, a 29% sequential increase and 165% year-over-year improvement. The growth was fueled by a 50% increase in Gorilla® Glass sequential sales as more handheld and IT consumer device manufacturers make it the cover glass of choice. These Gorilla® Glass sales include TV cover glass.
Corning's equity earnings totaled $398 million compared to $511 million in the previous quarter and $469 million a year ago. Equity earnings included nonrecurring gains of $103 million in the fourth quarter of 2010 and $21 million in the first quarter of 2010.
Gross margin for the quarter remained strong at 45%, an increase versus fourth-quarter gross margin of 43%. Net profit before tax, excluding special items, was $867 million, an increase of 15% sequentially, and the result of strong sales growth, higher gross margin, and lower operating expenses. Excluding special items, net profit after tax was up only slightly sequentially, the result of the anticipated increase in the company's effective tax rate.
Looking Forward
James B. Flaws, vice chairman and chief financial officer, said, "First-quarter performance was tremendous and it bolsters our confidence that each of our business segments will experience substantial growth this year and for several years to come."
In the display segment, Corning expects combined glass volume in the second quarter to be consistent with the first quarter. Glass volume for the company's wholly owned business is anticipated to decline in the low- to mid-teen range sequentially, primarily the result of lower utilization rates at several customers. At Samsung Corning Precision, volume is expected to increase in the low- to mid-teen range for the quarter. Glass price declines are expected to continue to moderate.
Regarding the earthquake and tsunami in Japan and Sharp Electronics Corporation's recent utilization reductions, Flaws said, "We have reviewed the display component supply chain in Japan. It is our opinion that a potential component shortage that could cause a significant disruption is unlikely. With regard to Sharp's decision to reduce production, we see this as a temporary situation that will not last beyond the second quarter."
As a result, the company expects a significant increase in LCD glass demand in the third quarter with Sharp resuming production and the global supply chain preparing for the seasonally strong fourth quarter.
Telecommunications segment second-quarter sales are expected to increase around 20% sequentially and be up nearly 30% year over year.
Environmental Technologies segment second-quarter sales are expected to decline slightly sequentially compared to a record first quarter. Year-over-year quarterly sales increases should be about 35%.
Specialty Materials sequential sales in the second quarter are expected to grow about 20%, the result of continued strong Gorilla® Glass performance.
Corning anticipates that equity earnings will be up about 10% sequentially.
"There are several key market trends that seem to be playing to Corning's strengths as we look to the future. These trends provide us with great opportunities across all our major businesses and position Corning to grow sales to more than $10 billion by 2014," Flaws concluded.