LCD screen glut hits Corning

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Shares in Corning fell by around 10 per cent in early trading on Wednesday after the US glassmaker warned that the recent global inventory glut of LCD screens may take longer to work off than investors had hoped.

Coming from the company that is estimated to supply more than half of all the glass used in LCD screens, the cautious comments are likely to hit the mostly Asian companies that dominate the market for finished screens.

“Inventory levels did come down” in recent weeks, “but they’re not down to the levels we came into this year at,” said Jim Flaws, Corning’s chief financial officer.

Speaking in an interview after the US company released its second quarter results, Mr Flaws said Corning had decided to project an unusually wide range of 5-15 per cent sequential revenue growth for the present quarter. “That range really reflects some of the uncertainty we feel today about how fast demand will snap back up,” he said.

He added that the risk that high energy costs and rising interest rates would start to weigh on demand for its products had also contributed to the company’s more cautious stance.

Excess inventory in the LCD supply-chain normally cleared quickly as screen makers cut their prices, Mr Flaws said. Corning believed the longer period needed to reduce the current build-up could reflect the more mature state of the computer monitor market, where some 80 per cent of screens sold are already LCDs and where price elasticity may no longer be as pronounced, he added.

The US company, which supplies more than half of the glass used to make the LCD displays that go into computer monitors and TVs, predicted revenues of $1.26bn-$1.33bn for the coming quarter, below the $1.41bn that Wall Street has been expecting.

For the most second quarter of the year, it reported a 13 cent slump in the volume of glass shipped by its wholly owned LCD operations in the second quarter compared with the preceding three months. However, thanks to a more resilient performance from a joint venture glassmaking operation with Samsung, whose LCD sales have held up better than many in the industry in recent weeks, the US company was able to limit the overall fall in LCD glass to 6 per cent, compared with a downbeat estimate of a decline of 0-5 per cent it issued in May.

Corning reported an 11 per cent increase in revenues to $1.26bn for the second quarter, below the $1.32bn that the market had expected. The shortfall was limited by a better-than-expected jump in sales of optical fibre to telecommunications companies. Earnings of 32 cents a share, or 26 cents excluding certain one-time items, were in line with forecasts.

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