6 November 2002 -- For Corning Inc, the world's biggest maker of optical fibre and cable, Q3/2002 sales were USD837m (down 7% on Q2 and 22% on a year ago). This is at the low end of its July projection of USD825-875m.
Information display segment sales rose 7% sequentially, but this was more than offset by the telecoms segment. Corning said that fibre and cable sales volume were down 10% and fibre prices were down 10-15%.
The Q3 loss was USD260m (up from USD220m a year ago but down from Q2's USD370m). This is Corning's sixth consecutive quarterly loss since Q1/2001. The figure includes a previously announced restructuring and impairment pre-tax charge of USD125m (USD85m after-tax and minority interest).
"Telecom carriers continue to indicate that they will further reduce investments in 2003," says vice chairman and chief financial officer James B Flaws. "As a result, we are taking decisive action to re-size our businesses to reflect today's economic realities. These actions will contribute to our plan to achieve profitability in 2003."
Corning therefore expects Q4 pre-tax restructuring and asset impairment charges of USD550-650m for the following actions (to be completed by early 2003):
-- the permanent closure of Corning's optical fibre manufacturing facility in Noble Park, Victoria, Australia;
-- the proposed closure of its fibre facility in Neustadt bei Coburg, Germany;
-- the mothballing of its fibre facility in Concord, NC, USA and transfer of certain capabilities to its facility in Wilmington, NC, USA (a year ago the plants had been shut down for three months - the Concord facility can be returned to productive capacity within 6-9 months of a decision to reopen);
-- proposed reductions in capacity and employment levels in the cable, hardware and equipment business;
-- the permanent closure (by end-2002) of its photonic technologies thin-film manufacturing facility in Marlborough, MA, USA.
Corning will also continue its merit freeze for salaried employees into 2003 and make certain benefit reductions including changes to its investment plan and retiree medical plan.
The above restructuring actions will save at least USD165m annually but result in a reduction of about 2,200 more jobs (8.5% of staff). This is in addition to April's announcement of a USD600m pre-tax restructuring and impairment charge spread over Q2 and Q3, which involve a staff reduction of 4,600, mostly from the telecom business, but annual cost savings of USD265m.
This brings 2002 restructuring and impairment charges to about USD1.3bn pre-tax and headcount reductions to about 6,800 for 2002. In 2001 Corning announced 12,000 job cuts and USD961m in charges. After the latest cuts, total headcount will be about 23,500, representing a 60% cut in staffing since January 2001. Corning began 2002 with about 31,000 staff. "We are also evaluating other restructuring actions and we may announce further charges later in the current quarter," adds Flaws.
Corning expects Q4 sales of USD775-825m, mainly due to continued volume and price declines in the fibre and cable business, together with some impact due to seasonality, spending cuts by carriers, bankruptcies and a lack of industry consolidation. Volume is expected to fall by 10-15%.
"While we will significantly reduce our optical fiber and cable manufacturing capacity with the actions announced today, we will be in a position to quickly re-start our Concord factory when market conditions improve," said chairman and CEO James R Houghton.