Topic of the Month in May: Review on Global Players in Specialty Glass Market

The slump in the high-tech and electronic industries drove demand for specialty glass products downward.

Corning reported that they set out to re-shape the company, adjusting to the new realities of the market. During 2002, they focused relentlessly on a very clear plan with top priorities: to preserve the financial health of the company and to return to profitability in 2003.

During the course of the year - with a recovery in the telecommunications industry still nowhere in sight - they achieved to restructure the company and dramatically lowered cost structure. Corning Technologies segment has had a strong year, and has set aggressive goals for both sales and profit growth for 2003, particularly the liquid-crystal display, environmental and semiconductor optics businesses. These are strong businesses which continue to set the standard for their markets and have plenty of growth potential. It is also said that they reduce the fixed cost structure to get optical fiber and cable operations back to profitability. Corning realised plans to close several of its fiber plants and to streamline cable operations throughout the world. They report that the optical fiber and cable business remains challenging for the short term and that the optical components market remains very weak.

Osram Sylvania also announced plans to consolidate its glass operations. The company will move glass production for fluorescent lamps and will also move glass manufacturing for incandescent lamps to its main incandescent glass plant in Wellsboro, Pa. The company's Central Falls plant would continue to produce its other primary product, borosilicate glass, for high-intensity discharge (HID) lamps.
"Rapid and dramatic change in the global marketplace for our glass business over the last three years has resulted in significant underutilization of Osram Sylvania's three North American glass plants," said Asahel Parmelee, executive vice president and general manager of the company's worldwide Precision Materials & Components division. According to Parmelee, lower-than-projected demand for finished lamps, consolidations in the lamp-making industry and the importation of lamps manufactured outside of the U.S. contributed to the current situation.
Saint Gobain Glass reports that Reinforcements faced downward price pressure and, despite a sharp improvement in volumes, was the only one of its glass divisions to report a slight contraction in sales over the period.
Not all specialty glass segments have declined, however. Mr Raymond W. LeBoeuf, PPG chairman and chief executive officer said: "We expect the global economic environment to be challenging once again in 2003." PPG's glass sales increased slightly and earnings rose $7 million from overhead reductions and greater manufacturing efficiencies, despite lower prices and higher pension and retiree medical costs.

German global player Schott reports that they are still on course despite difficult terms. They report slightly reduced sales and the recovery in strength of the euro is no longer as helpful in exporting to the American and Asian regions. Total orders were again down slightly on the year before. However, there were differences in the development of Schott's markets. While the telecommunications and semiconductor markets virtually collapsed - which made Schott to close down the operations of Group companies Schott Optovance Inc., Southbridge/Massachusetts and Schott Telecom Optics GmbH, Mainz, the markets for household appliances and pharmaceutical packaging were relatively stable.

Their Advanced Optical Materials and Components Strategic Business Unit as a whole suffered badly from the weakness in the economy. However, some optical high-tech materials and special components for microchip manufacturing still continued to develop positively.
Foreign sales of the Schott Group, i.e. exports from Germany plus sales generated by production outside Germany, were unchanged on the previous year at 79 percent.

Likewise, Asahi Glass reports to have narrowed its Fiscal-Year net loss. The Japanese specialty glass manufacturer said that it now estimates a group net loss of Y5 billion for the fiscal year ended March 31, a bit narrower than the Y6-billion loss it previously forecast. The company added that improvement in its mainline business operations, as well as the use of tax-effective accounting, helped cancel out losses related to the shutdown of production at a U.S.-based cathode-ray tube-making subsidiary it shares with the U.S.' Corning Inc.

The general cautious forecast for the global economic situation had proved correct. The economic recovery at the beginning of 2002 was only temporary. Continued low level of investment activity and a decline in private consumption had held back the growth of the U.S. economy. In the European Union growth impulses had weakened and domestic demand had stagnated at a low level with no serious growth impulses in exports. In contrast, the Eastern European candidates for EU membership had benefited from a stable domestic demand, as had the Asian markets. The crisis in the Argentinian finance market, political uncertainty in Brazil and the unrest in oil-exporting Venezuela were a burden on the economic climate in North and South America.

Expectations of growth in Germany had recently fallen again. Uncertainty about future economic development and the looming increase in the burden of taxes and other charges had slowed down the inclination of companies to invest and consumer spending in Germany. Exports, on the other hand, continued at a high level. According to the latest spring surveys of leading economic research institutes in Germany, gross domestic product will rise by only 0.5 percent in 2003.
Now, reviewing all three sectors of the glass business - hollow glass / flat glass / specialty glass - one common conclusion can be drawn: all corporations all together are caught in a tense situation. In many places, companies are drawn to tactics of perseverance with parallel consolidation of inefficient business units, which unfortunately will not go without shutdowns of facilities and reduction in staff. It is to hope that the situation ameliorates at medium term and that the world markets recover again.

Source: OGIS GmbH, www.glassglobal.com
(The foregoing information was compiled from publicly available information in annual reports and news releases)