Kodak posts lower 2Q profit, revises outlook (AP)
By BEN DOBBIN, AP Business Writer 7 minutes ago
ROCHESTER, N.Y. - Eastman Kodak Co. said Thursday its second-quarter profit fell 14 percent as digital inkjet-printer investments and higher costs for raw materials offset a hefty tax settlement gain. It also warned that full-year operating earnings will come in at the lower end of its previous forecast, sending its already depressed stock down 10 percent.
The photography pioneer, which has transformed itself from the world's biggest maker of chemical-based film products to one centered on electronic imaging, said it earned $495 million, or $1.62 a share, in the April-June quarter, down from $575 million, or $2 a share, a year earlier.
Sales edged up 1 percent to $2.49 billion from $2.47 billion, as revenue from digital businesses rose 10 percent to $1.64 billion but traditional film-based revenue slumped 14 percent to $847 million.
Excluding a tax settlement gain of $270 million and other one-time items, Kodak lost $40 million, or 13 cents a share, in the latest period. Analysts polled by Thomson Financial had expected, on average, earnings of 16 cents a share on sales of $2.44 billion.
The company said it now expects 2008 operating profit to finish at the lower end of its previously forecast range of $400 million to $500 million. It continues to predict total revenue growth of up to 2 percent, with digital sales gains ranging from 7 percent to 10 percent.
"Despite a challenging economic environment and significant increases in commodity costs, we are achieving our strategic objective of becoming a growing and profitable digital company," Chief Executive Antonio Perez said in a conference call with analysts.
Perez revealed that Kodak is investing an extra $125 million in the second half to catapult sales of a year-old line of home inkjet printers that produce high-quality photos using inexpensive ink cartridges.
"The startup phase is behind us and we are now ready to put in place investments that will deliver higher volumes than previously planned in 2009," he said.
Kodak's stock has already plunged 27 percent this year amid concerns that sustained profits remain elusive even after a mammoth four-year overhaul. Shares fell another $1.63 to $14.14 in midday trading.
"While they're growing in digital cameras and inkjet printers, they're not making any money in those new businesses," said analyst Chris Whitmore of Deutsche Bank Securities in San Francisco. "That's the fundamental problem and it doesn't seem like there's much to change the profit outlook for the segment in the next six to 12 months."
Quarterly sales in consumer digital imaging rose 17 percent to $756 million, propelled by digital cameras and picture frames. The division recorded a slightly smaller operating loss of $49 million, as it invested in its consumer inkjet printer and image sensor businesses.
Graphic communications sales rose 5 percent to $880 million but operating earnings fell by more than half to $13 million, hurt in part by higher aluminum costs and increased investments in a fledgling commercial color press that can churn out more than 2,500 pages a minute.
Perez said he now expects the continuous-feed printer, known as Stream, will be brought to market in 2009 instead of 2010 — three to six months earlier than planned.
Sales in its film and photofinishing unit fell 14 percent to $847 million, largely reflecting slumping sales of film and photofinishing services. Operating earnings slid to $54 million from $121 million, largely because of lower volume sales and higher silver and other raw material costs.
After accumulating more than $2 billion in losses over three years, Kodak has posted profits in five of the last seven quarters.
Converting the bulk of its business from high-profit film to more highly competitive digital technology cost Kodak $3.4 billion from 2004 through 2007. It chopped its work force from 64,000 to 26,900, which included selling a health-imaging unit that employed 8,100 people.
Through 2011, Kodak has said it expects revenue to rise 5 percent a year, driven by a 10 percent to 12 percent annual rise in digital sales. Operating profit, it forecasts, will more than triple to $1 billion.
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