CORNING | After a bumpy year in a couple of key segments, Corning Inc. officials say their fundamentals remain strong, and that they expect the market downturns that hurt 2019 results to begin to reverse in the second half of this year.
"As a company, we expect to return to growth year-over-year in the second half as volume improves in both Display [Technologies] and Optical [Communications]," company Controller Ed Schlesinger told The Leader during a meeting Wednesday at Corning Inc. headquarters.
The company’s stock ended the day at $28.35, up $0.37 from the previous day’s close, after an early-morning spike above $29.
For the full year, the company’s net sales were up just 2 percent, while net income, using Corning’s own "core" measurements, was down 6 percent.
The GAAP measure reported to federal officials were the same for sales but showed income down 10 percent -- the company has frequently stressed that its "core" figures are a better indicator of performance because they are adjusted for factors such as exchange rates and one-time charges.
Corning showed earnings per share of $0.46, again by "core" measurements.
"This was slightly better than our expectations," Schlesinger said.
He noted that the company has faced "headwinds" over the last year, particularly the second half of 2019.
"Display [Technologies] and Optical Communications were down [for the full year versus 2018], primarily due to market challenges," Schlesinger said.
"What drove the change in Optical over 2019 was primarily spending at a few significant customers -- that was the biggest impact for Corning, although we saw spending declines [from] many customers," he added. "We expect those customers and other customers to spend more in the back half [of 2020]."
Still, the company’s own projections still show sales down overall, 5 to 10 percent, during the coming year in Optical.
Schlesinger said it’s difficult to determine when the kind of major projects from large companies that drive numbers in that business will take place.
"The timing of those projects will affect whether we’re at the bottom of that range or at the top of that range," he said.
But he said that market downturn doesn’t paint a full picture of the company’s position.
"For the full year, Specialty Materials, Environmental Technologies and Life Sciences all grew sales year-over-year," Schlesinger said.
In Specialty Materials, net sales were up 8 percent year-to-year, though net income was down 4 percent.
Environmental Technologies saw sales growth of 16 percent for the full year 2019 over 2018, with income up 26 percent.
And Life Sciences, a segment the company hopes will become a larger driver of profits as its Valor packaging solution for medications sees increased adoption, was up 7 percent for the year in sales, with income 28 percent higher than 2018.
In response to market conditions last year, Corning has made moves to ensure it doesn’t have more capacity than customers need -- that’s included equipment and facilities, as well as workforce.
"We don’t flex the workforce extremely, but we have the capability to flex the workforce down when necessary and bring the workforce back online [later]," Schlesinger said.
A number of layoffs in the Corning area were reported recently, though it represented a very small percentage of the company’s local workforce.
It’s unclear whether that was a one-time event.
"Company-wide, we still have things we’re doing to make sure we have the right capacity in place for each of our businesses, and that may have a workforce impact," Schlesinger said.
There are also other factors in play.
"As part of bringing on new assets [to adjust capacity], we’re always thinking about how to make those assets more cost-effective, which may mean you have a different type of workforce or different needs," he added.
But Corning spokesperson Beth Dann noted that the workforce in the Corning area isn’t particularly vulnerable to the changes that are currently being made.
"The biggest impact is in Optical Communications," Dann added. "Locally, [the labor workforce] is primarily [in] the Environmental Technologies business, which is strong."
Overall, Schlesinger said that the company’s expectations and the targets it’s set for itself within 2020 and through its 2020-23 Strategy and Growth Framework, if met, will be positive for both the local and company-wide workforce.
Schlesinger said for not only investors in general but retirees who hold a stake in the company, the message is strong fundamentals despite short-term setbacks in particular markets.
"The health of Corning, financially, is very good," he said. "We’ve grown over the last few years, we invested significantly in innovation and we invested in capacity. We feel like we’re well-positioned to continue to grow.
"From time to time you’ll see cycles in various markets that will impact us, but the positive is we’re able to outperform the markets with our businesses.
"That’s where we’ve done a nice job, and they should feel good about us continuing to do that over the next few years."
Schlesinger and Dann said the company’s position as a tech leader means that as large segments such as Display see stabilizing pricing and the smaller Life Sciences business is a middle-term target for growth, there’s always something exciting on the horizon.
"There’s a tremendous amount happening in [the automotive industry] right now that our technologies are playing a big role in, both on the emissions side -- which is changing to meet the trends toward electrification, but also hybrids," Dann said. "But on the other side, on the interiors especially, glass is increasingly playing a huge role."
And while delayed rollouts of major fiber infrastructure hit the bottom line last year, 5G deployment is still underway, and Corning has a stake beyond just the optical fiber.
"The view is that 5G phones will generally require more glass content, and will generally be higher-end, and that plays out very well for us [in Specialty Materials]," Schlesinger said.