Corning 3Q15 Earnings Call Notes

Corning (GLW) Wendell P. Weeks on Q3 2015 Results

Results were hit by weakening global economy and softening in television and IT retail

“macroeconomic headwinds are affecting our performance in the near term. Our businesses were slowed by the weakening global economy, the unexpected devaluation of the Chinese currency, and the softening in the television and IT retail markets. ”

Weakening economies, particularly China. TV growth in China has slowed

“weakening economies, particularly in China, and the stronger dollar impacted our businesses. For example, TV demand is weaker. TV growth in China has slowed. TV demand in Europe, Latin America, and Middle East Africa is softer due to the effect of the stronger dollar on retail prices and continued economic uncertainty.’

IT and mobile demand is weaker…smartphone sales should be flat in China

“IT and mobile demand is weaker, driven by lack of replacement drivers, the strong dollar, and continued economic uncertainty. We expect the worldwide IT market to be down 10% this year and smartphone sales in China to be flat versus last year.”

China’s auto and heavy duty truck production has slowed

“China’s auto and heavy-duty truck production has slowed through the year. China’s auto production is now expected to be flat year-over-year, and heavy-duty truck production is down 34% year to date.”

Expect global headwinds to persist in 4Q

“We expect the global economic headwinds to persist in the fourth quarter and impact most of our businesses year-over-year.”

Expect glass prices not to decline though

“We do not expect our pricing to be significantly affected by the weaker than anticipated glass demand. Glass price declines have been below historic levels for the last 12 months. As we have previously explained, we expect this more favorable pricing environment to continue and maybe even improve for several reasons.”

Our competitors cannot remain profitable at lower prices, Yen has given customers benefit, and supply demand balanced

“the financial situation at our competitors indicate that they cannot continue historical price declines and remain profitable. Second, the significant weakening of the Japanese yen has in itself given our customers a significant economic benefit without any decline in the yen price of our glass. And third, as we said before, we believe that glass supply and demand will remain balanced throughout this recent weakening in panel demand.”

These numbers were worse than expected thanks to weak demand

“these numbers actually were a little bit worse than what we had expected. When we began the quarter, we thought volumes would be up sequentially, and they weren’t. Now some of that, of course, was the contract dispute that I talked about. But the rest of it was panel maker utilization went down a little bit more than we expected, and the reason it did was our expectations for the end market came down during the quarter. And those expectations came down as evidence came in that TV demand was going to be lower for the full year than we thought it was going to be, and that was also true from an IT demand standpoint”

It’s too early to say that 4k is going to drive replacement cycles, but we like the product

“It’s still too early to call the bend in the curve, right, where it’s going to drive replacement cycles. And we’ve got an awful lot of noise in the marketplace with the really strong dollar, sort of the economic headwinds. So the data just isn’t screaming at us yet that we’ve got that driving replacement cycle feature. But, gosh, you can’t help but look at these things technically and really like what you’re seeing.”

All I do is work with young people

“All I do is work with young people these days. So I normally feel old. But anyway, I digress.”

Sometimes we forget that different industries move at different speeds

“sometimes we forget that different industries move at different speeds. So not everything moves like tech, not everything moves like consumer electronics and mobile consumer electronics. Matter of fact, few things do. So for instance, it is frustrating how long it’s taking us to get widespread adoption of lightweight glazing in automotive. It’s a heck of a good idea, good for consumers, it’s good for the environment, it’s good for safety, it’s good for almost everything. But the industry, even when you’re a highly-valued supplier, as we are, it just takes time.”