Specialty glass maker Corning Inc. said Wednesday that its second-quarter profit slumped 17 percent, mainly because of a higher tax rate and a liquid-crystal-display glass supply disruption caused by Japan's earthquake and tsunami in March.
Revenue rose 17 percent but Corning warned that retail demand for LCD TVs will likely slow in the second half of the year. It lowered predictions for how much glass would be produced this year.
Its shares tumbled 64 cents, or 3.7 percent, to $16.65 in premarket trading.
The world's largest maker of liquid-crystal-display glass said its net income fell to $755 million, or 47 cents per share, in the April-June period from $913 million, or 58 cents, a year earlier.
Excluding special items, earnings were 48 cents a share. That was a penny above Wall Street expectations.
Revenue jumped to $2 billion from $1.71 billion. Analysts expected $1.98 billion.
The company attributed the profit decline largely to an increase in its tax rate to around 13 percent from 3 percent last year.
Corning saw year-over-year growth in four of its five business units -- from LCD-TV and Gorilla cover glass to ceramic auto-pollution filters, research labware, and optical fiber and cable.
The exception was Corning's display technologies segment, its biggest business by far, where sales fell 9 percent to $760 million. It blamed the slowdown on Sharp Electronics' curtailment on LCD-TV production in Japan in the first half of the quarter.
But Corning also lowered its expectations for overall LCD glass production in 2011. It now expects industry-wide volume to reach 3.3 billion to 3.4 billion square feet in 2011, down from a previous forecast of 3.6 billion and 3.8 billion square feet.
"The display industry has been behaving more cautiously in recent weeks, driven primarily by weaker retail expectations for the second half," said Corning's chief financial officer, Jim Flaws. "We have seen many LCD-TV brands reduce their sales forecasts for the year."
DisplaySearch estimates that 210.5 million LCD-TVs will be shipped worldwide in 2011, up 10 percent from 2010. But in North America, shipments are expected to rise just 2.6 percent to 39.3 million units. Three months ago, the market-research firm from Austin, Texas, projected a 5.8 percent jump in North American shipments.
In the United States and Europe, "a lot of the price declines that used to drive the sharp growth in the LCD category in the past really aren't materializing as much as this year," DisplaySearch analyst Paul Gagnon said.
In contrast, growth seen in emerging markets such as China, India and Eastern Europe is expected to remain vigorous as shoppers swap traditional cathode-ray-tube TVs for LCD TVs, he said.
While Corning commands more than 60 percent of the LCD glass market, the 159-year-old company is also the world's largest producer of optical fiber and cable. Based in western New York, it employs 26,000 people.
Revenue in Corning's telecommunications unit jumped 24 percent to $548 million on higher demand for fiber-to-the-home products in North America and Europe.
Propelled by ultra-strong Gorilla glass, which is now migrating from hand-held and tablet devices to high-end TVs, specialty materials revenue more than doubled to $283 million.
Corning has said sales of Gorilla glass could surge to $1 billion this year from $250 million in 2010. Sony Corp. began incorporating Gorilla glass in a new line of Bravia TVs this spring. Invented in 1962, Gorilla found commercial use only in 2008. LG Display Co. and Asahi Glass Co. make competing products.
Environmental technologies revenue jumped 40 percent to $258 million, driven by robust demand for auto-pollution filters.
Life-sciences revenue rose 24 percent to $155 million, reflecting Corning's acquisition of Axygen BioScience Inc. as it shifts beyond a heavy focus on display glass. It bought the maker of plastic labware and liquid handling products for research labs for about $400 million in September 2009.
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