Kodak posts $168 million loss in second quarter as film sales plummet
By Ben Dobbin, APWednesday, July 28, 2010
Kodak has 2Q loss, ending consecutive up quarters
ROCHESTER, N.Y. — Robust inkjet printer sales and fewer charges narrowed Eastman Kodak Co.’s loss to $168 million in the second quarter, but its slumping film business cast a shadow over the photography pioneer’s prolonged digital transformation.
Kodak’s adjusted earnings fell short of Wall Street expectations Wednesday as profit from traditional film-based products plunged 43 percent, driven by an 18 percent drop in motion-picture film revenue.
Snapping a run of two straight quarterly profits, the April-June period raised renewed concerns about Kodak’s ability to make good on its painful overhaul and its stock slid hard. The 129-year-old company has eliminated almost 50,000 jobs since 2002, and its work force of 20,300 is its smallest since the 1930s.
Sales dropped 11 percent to $1.57 billion from $1.77 billion.
Revenue from digital businesses fell 6 percent to $1.1 billion from $1.17 billion, dragged down by an 11 percent drop in sales of cameras and other consumer products. Film-based revenue sank 21 percent to $466 million from $593 million as earnings from operations fell to $29 million from $51 million.
“The goal has been to get the digital businesses profitable to offset the declines in the film business, and clearly that’s not happening at the rate it needs to,” said analyst Shannon Cross of Cross Research in Livingston, N.J.
“The performance in the film business, I think, indicates that new technologies — digital cinema and even just new ways of filming — are really starting to impact their business.”
But since Kodak typically leans heavily on end-of-year holiday sales, Cross cautioned that “it’s hard to make a call on the full year based upon what we’ve seen in the first half.”
Chief Executive Antonio Perez said Kodak now expects motion-picture film volume to drop at a double-digit clip in the second half of 2010 rather than by single digits, as previously forecast, because fewer Hollywood films are being made and “financing continues to be constrained for the independent film market.”
The global migration to digital screens, though, is still on course to expand to around 45 percent of first-run theaters from 18 percent at the end of 2009, Perez said in a conference call with analysts.
“Technology transitions are never easy but, on the whole, I’m quite pleased both with the direction and the pace of our progress,” he said. “Our new digital businesses are gaining significant traction and … we believe will compensate for the extra decline of (motion-picture film volume) that we did not see coming.”
Kodak said it lost the equivalent of 63 cents a share in the second quarter. That compared with a loss of $189 million, or 70 cents per share, a year earlier.
Excluding restructuring and tax-related charges of $31 million, or 11 cents a share, Kodak said it lost $136 million, or 51 cents per share. That compares with $75 million in one-time charges in last year’s second quarter.
Analysts polled by Thomson Reuters, whose estimates typically exclude one-time items, expected Kodak to lose 32 cents per share on sales of $1.69 billion.
The company’s stock tumbled nearly 14 percent, or 67 cents, to $4.26 in afternoon trading.
The stock is trading at the lower end of its 52-week range of $2.87 to $9.08 a share.
Revenue from consumer inkjet printers and ink swelled by 50 percent in the quarter and sales in its commercial printing businesses grew 9 percent.
Kodak aims to begin drawing profits in 2011 from consumer inkjet printers, having doubled sales to more than 2 million units last year. It expects its commercial inkjet systems to become profitable in 2012.
The company is relying on lower costs, royalties from digital-camera inventions, and rapidly shrinking but still high-margin film revenue as it battles to remake itself.
After a $3.4 billion turnaround from 2004 to 2007, Kodak’s momentum was stalled by the economic downturn.
It ran up four quarterly losses before turning profitable again in the last three months of 2009. But its $119 million profit in the first quarter was produced by a one-time, $550 million settlement deal with Samsung Electronics Co. over disputed digital-imaging technology.
