Kodak revenues slide but profits up in Q1

By Hannah Jordan, Thursday 11 May 2017

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Kodak posted a net profit in the first quarter of 2017 of $7m (£5.4m), a $22m improvement on the same period last year, but sales were down 5%.

kodak-prosper-drupa-2016

Revenues continue to slide but profits show improvement

Revenues fell by $20m to $357m compared to $377m in Q1 2016 while operational Ebitda was down $19m to $8m, which the company said was “consistent with expectations”.  

Kodak cited pricing pressures in its pre-press plates business as well as the continued decline in its consumer inkjet cartridge sales for the drop in sales although the impact was partially offset, it said, by strong growth in key product lines including its loss-making Prosper inkjet business, which it had sought to sell until earlier this year. The business lost $28m last year (£22.6m).

However, in the three months to 31 March annuity revenues for the Prosper inkjet business grew by 26%. Kodak had announced its intention to sell off its Prosper and Ultrastream inkjet operations in March 2016 with a sale sought by the end of the year, but after reportedly receiving numerous offers the company decided to retain the business. The decision was partly due to improved performance of its Prosper business and positive reaction to its Ultrastream technology, the company said.

Kodak also reported volume growth in Q1 2017 of 24% and 22% respectively for its Sonora processless plates and Flexcel NX plates.

“We expect continued strong execution in these growth businesses, which will continue to increase our quality of earnings,” said Kodak chief executive Jeff Clarke. 

Kodak ended the quarter with a cash balance of $434m, down $56m on the same period last year, with the company citing increased seasonal build of inventory, year-on-year reduction in operational Ebitda and non-recurring items last year for its higher cash spend.

Chief financial officer David Bullwinkle said: “In total for the remaining nine months of 2017, we expect to generate cash.”

Kodak' largest division, Print Systems Division, saw an 8% decline in revenues in the period, compared with Q1 2016, to $213m despite strong volume growth from its Sonora products, while operational Ebitda fell by 28% to $13m. Price pressures in digital plate sales were blamed for the poor performance.

Results for the Enterprise Inkjet Systems Division, which includes Versamark and into which the Prosper business has now been incorporated since the decision to retain it, showed improvement with increased sales of $37m in Q1, up 9% from 2016. Operational Ebitda showed a loss of $1m, a $4m improvement on Q1 2016.

In a reporting structure rejig, the company created a new division for Flexographic Packaging, which includes its Flexcel NX Systems and Plates as well as other packaging businesses, including SR and letterpress plates, proofing products and services. The division reported a $4m increase in revenues to $33m. In April the company announced a $15m investment in its Oklahoma manufacturing site for the production of its Flexcel NX plates.

In its Q1 report, Kodak revised its expectations for the year to reflect the retention of Prosper as well as the rising cost of aluminium. Revenues for the full 2017 year are expected to be between $1.5bn-$1.6bn with Ebitda of $105m-$120m, compared to net earnings in 2016 of $75m.

Kodak share price remained stable after yesterday evening’s (Tues 9 May) announcement, closing at $10.75 (52wk high: $17.29, low: $9.55). 

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