Corning – Quick
Corning (GLW) reported 3Q results a bit under expectations and guided to a weaker than consensus 4Q. While sales were at an all-time high, it was almost impossible for Corning not to have been affected by both inflationary and demand issues. While we will go into more detail tomorrow, both the display and specialty materials (Gorilla Glass, etc.) saw strength despite weakening demand, and glass prices increased a bit in the quarter, but despite some positive design news for Gorilla Glass in the automotive segment, weak auto sales due to semiconductor shortages offset the display growth. Specialty materials itself was strong, despite relatively weak smartphone shipments across the industry, but management indicated that the build-out of new products could pressure margins a bit going forward.
Inflation was a big topic in Q&A and Corning management admitted that what they thought a few months back was a short-term bout of inflation now seems to be something longer-term in nature, with the company taking steps to negotiate new pricing with customers in those areas that have seen the most cost increases. The display glass market, which has been quite tight during the last year and saw price increases last quarter, something rarely seen, seems to be a bit less so, as the company is implementing glass melter shut-downs and relining whenever possible, something that was past due but would have meant being unable to meet customer production goals in the past. With lower large panel utilization levels from customers, GLW will have the opportunity to rebuild some of that older and less cost effective capacity, but the fact that they are able to consider that process indicates a lower level of overall demand.
While Corning performed well in 3Q and remains in the best spot possible in the display space, the ultra-large (Gen 10.5) glass market, they are not immune to the overall economic pressures that have been affecting other CE suppliers. They remain optimistic about their ability to grow, but seem also to acknowledge that things are evolving differently than they might have predicted earlier in the year. Typical growth generators in the company’s display business, particularly panel size growth will continue, but the generous pricing environment that was the case for much of last year and this year, is now being eroded by rising costs. Because the display glass market is one with few players and high upfront costs, Corning is better situated than any other glass producer, but a sustained downturn in the display space and a continuation of cost increases will make generating growth a bigger chore than it has been in recent quarters.
Inflation was a big topic in Q&A and Corning management admitted that what they thought a few months back was a short-term bout of inflation now seems to be something longer-term in nature, with the company taking steps to negotiate new pricing with customers in those areas that have seen the most cost increases. The display glass market, which has been quite tight during the last year and saw price increases last quarter, something rarely seen, seems to be a bit less so, as the company is implementing glass melter shut-downs and relining whenever possible, something that was past due but would have meant being unable to meet customer production goals in the past. With lower large panel utilization levels from customers, GLW will have the opportunity to rebuild some of that older and less cost effective capacity, but the fact that they are able to consider that process indicates a lower level of overall demand.
While Corning performed well in 3Q and remains in the best spot possible in the display space, the ultra-large (Gen 10.5) glass market, they are not immune to the overall economic pressures that have been affecting other CE suppliers. They remain optimistic about their ability to grow, but seem also to acknowledge that things are evolving differently than they might have predicted earlier in the year. Typical growth generators in the company’s display business, particularly panel size growth will continue, but the generous pricing environment that was the case for much of last year and this year, is now being eroded by rising costs. Because the display glass market is one with few players and high upfront costs, Corning is better situated than any other glass producer, but a sustained downturn in the display space and a continuation of cost increases will make generating growth a bigger chore than it has been in recent quarters.
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