MATERIAL COSTS AND INKJET COMPETITION DEEPENS KODAK LOSSES

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MATERIAL COSTS AND INKJET COMPETITION DEEPENS KODAK LOSSES
Parts of Eastman Kodak Co. are doing pretty well, especially its consumer inkjet printer business, but those bright spots are islands in a pool of red ink.

Kodak’s sales overall in the second quarter of 2011 were down 5 percent from a year earlier, the company said today as it announced its latest quarterly financial results. Its consumer digital imaging group and film, photofinishing and entertainment group did even worse. The rising costs of silver and aluminum, as well as Kodak’s spending on such businesses as inkjet printing, deepened its bottom-line losses.

And the company, which had predicted 2011 would be a pretty bad year, now thinks it will be even worse, with losses from continuing operations of $200 million to $400 million instead of its previous estimates of $100 million to $300 million. Kodak also now is projecting that the business lines it has identified as being its best hopes for growth in the future will grow less rapidly this year. Commercial and consumer inkjet, packaging printing and workflow software are expected to grow a total of 30 percent to 40 percent this year, instead of Kodak’s previous estimates of growth greater than 40 percent.

The culprits, according to Kodak, include rising raw material costs, a price war in consumer inkjet printing and higher-than-expected startup costs in commercial inkjet printing.

In a statement, Kodak CEO Antonio M. Perez said that the company expects the second half of the year to be stronger, as has historically been the case.

Here are some of the key numbers:
Sales of $1.49 billion for the quarter, down from $1.56 billion in the second quarter of 2010.
The company’s graphic communications group sales of $685 million were up 4 percent, largely due to foreign currency exchange issues. But its losses were up due to raw material costs and the start-up costs of commercial inkjet printing.

 Its consumer digital imaging group’s sales of $404 million were down nearly 8 percent as Kodak is in the midst of scaling back its digital camera business, pointing to an overall industry that is stagnant. While its consumer digital business posted a loss, that loss was down from a year ago due to desktop inkjet printer ink sales and that focus in the digital camera business on profitability over sales.And sales in its traditional film business, the film, photofinishing and entertainment group, were $396 million, a 14 percent decline, as film demand continues to shrivel. The film business continues to be profitable for Kodak, however.Net losses of $179 million or 67 cents per share from continuing operations, compared to net losses of $167 million or 62 cents per share a year ago.

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August 1, 2011 at 9:32 AM