3M Discusses the Flat Panel Market

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3M LogoHere's the key quote from 3M's press release announcing weaker than expected optical film sales:

This second quarter performance was impacted in large part by lower than expected sales volumes and higher than anticipated new capacity start-up costs in its optical systems division, a part of 3M's Display and Graphics business segment. 3M develops and manufactures the world's broadest line of proprietary optical films that enhance the brightness and viewing angle of all types of LCD displays.

"As other companies in the LCD industry have recently noted, the industry has experienced an increase in inventory levels over the last few months, particularly in desktop monitors, which has significantly impacted sales of 3M optical films," said George W. Buckley, 3M Chairman, President and Chief Executive Officer. "Coincident with this, it appears the industry overestimated demand for LCD televisions in anticipation of the FIFA World Cup(NYSE:TM) and has temporarily reduced production accordingly, also impacting sales of our optical films. Finally, as demand for LCD TV accelerates, we expect LCD film sales will increasingly follow more seasonal patterns, with revenues being lowest in the second quarter and higher in the third and fourth quarters in anticipation of the holiday season," he added.

Buckley also noted that second quarter income would be negatively impacted by higher than expected start-up costs associated with the scale up of new multilayer optical film production capacity. "While manufacturing of multi-layer optical films is technically challenging, particularly in larger sizes, and start-up costs ran above plan in the quarter, we expect to resolve these issues as quickly as possible," Buckley said. "This new optical film facility is designed to improve yields, accelerate run speeds and enhance our ability to satisfy growing demand for increasingly larger LCD TV screens," he added. "3M's capability remains unmatched in this category, and by continuously providing technology-driven solutions for customers, including the larger-format films from our new production facilities, 3M is well-positioned in this fast-growth industry."