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 user 2008-08-01 at 2:43:38 pm Views: 64
  • #20051

    Eastman Kodak’s Profit Fell 14% In 2nd Quarter
    Kodak Net Income Falls 14% as Material Costs Surge
    08 — Eastman Kodak Co. posted second- quarter profit that trailed
    analysts’ estimates on rising costs for materials and development of
    the cameras and printers taking the 128-year-old photography company
    into the digital age.Net income dropped 14 percent to $495 million, or
    $1.62 a share, from $575 million, or $2, a year earlier, the Rochester,
    New York-based company said today in a statement. Excluding
    restructuring and other charges, Kodak had a loss of 13 cents a share,
    missing the average estimate for a profit of 15 cents.

    The loss
    on the adjusted basis is Kodak’s second straight since Chief Executive
    Officer Antonio Perez concluded a four-year program to focus on digital
    cameras and inkjet printers. Revenue and profit at Kodak’s traditional
    film business fell because of waning consumer demand and rising costs
    for aluminum and silver. Costs to develop products cut earnings at
    other units.“It’s costing them more to generate $1 of revenue,” said
    Shannon Cross, an analyst with Cross Research in Livingston, New
    Jersey, who recommends selling the stock. Perez “is placing bets on
    certain products and those businesses are costing him more than he
    anticipated,” she said in an interview.Sales rose less than 1 percent
    to $2.49 billion. The average of six analyst estimates compiled by
    Bloomberg was for sales of $2.44 billion. The company doesn’t issue
    quarterly forecasts.Kodak declined $1.09, or 6.9 percent, to $14.68 at
    9:31 a.m. in New York Stock Exchange composite trading. The stock had
    declined 38 percent in the past 12 months.

    reaffirmed its sales growth projection of as much as 2 percent, to
    about $10.5 billion based on last year’s revenue. Analysts, on average,
    project sales of $10.3 billion. Full-year earnings from operations will
    be in the low end of its forecast of $400 million to $500 million,
    Kodak said today.The year-ago quarter included benefits from the sale
    of a health unit. This quarter’s adjusted loss of $40 million compared
    with a profit of $112 million, or 39 cents, a year earlier.Kodak said
    in May it will raise prices as much as 20 percent on film, paper and
    printing plates that use silver and aluminum. A $1 increase in the
    price of silver costs Kodak an additional $20 million, Chief Financial
    Officer Frank Sklarsky said in May.“Unprecedented commodity cost
    increases across the business are presenting a headwind that we are
    aggressively addressing,” Perez, 62, said in today’s statement.The
    price of silver futures have jumped 36 percent in 12 months on the
    Comex division of the New York Mercantile Exchange. Aluminum traded in
    London has risen 24 percent. Crude oil futures in New York rose by more
    than 30 percent so far this year.

    Division Sales
    Sales rose
    at two of Kodak’s three divisions, declining only in the traditional
    film business. Sales in the U.S. fell 5.6 percent, to $913 million,
    while international revenue climbed 4.7 percent to $1.57 billion.
    Revised figures released by the Commerce Department today suggest the
    U.S. may have tipped into a recession in the final three months of
    2007.The Consumer Digital Group, which makes cameras, posted a sales
    gain of 17 percent and an operating loss of $49 million on research and
    development costs. The loss narrowed from $51 million a year
    earlier.Revenue from the Graphic Communications Group, which makes
    printers, rose 4.8 percent to $880 million, while sales of film and
    entertainment products fell 14 percent to $847 million. Both units
    reported profit that fell 55 percent.The company reaffirmed its
    forecast for digital revenue growth of 7 percent to 10 percent this
    year. Perez is investing more to develop digital products that will
    lift sales and said he expects to sell more inkjet printers in 2009.

    Perez Strategy
    became chief executive in June 2005 and last year completed a four-year
    program designed to return the company to profit. Kodak spent $3.4
    billion to cut 28,000 jobs as it expanded its digital and print
    products to lift sales, and Perez plans to roll out 50 percent more
    digital products this year than in 2007Kodak has paid down $242 million
    of debt since the end of 2007, bringing its outstanding loans to $1.36
    billion at the end of the quarter. The company had $2.31 billion in
    cash on hand.Cash generation will be $725 million to $825 million,
    above the prior forecast of as little as $400 million, Kodak said
    today. The new figure includes a $575 million tax refund and interest
    from a settlement with the Internal Revenue Service.The tax refund,
    disclosed last month, added 88 cents to earnings in the most recent
    quarter. Kodak is using the money to help buy back as much as $1
    billion in stock.