Kodak revenue down but profits up in full-year results

By Richard Stuart-Turner, Monday 19 March 2018

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Kodak has released its full-year and Q4 2017 earnings, posting $94m in net earnings for the year, but with revenue down 7% to $1.5bn (£1.1bn), from $1.64bn in 2016.

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Kodak's revenue fell by 7% to $1.5bn (£1.1bn) in 2017

Net earnings for the period – ending 31 December 2017 – included a $101m tax benefit, due to the release of a valuation allowance in Q4, as a result of increased profits in a location outside the US.

The company achieved Q4 revenue of $414m, down 4% from the $432m recorded in the equivalent period a year prior.

Operational EBITDA for the full year was $57m, down 47% from the $107m achieved in 2016, while for Q4 it was $20m, down 53% from the £43m recorded in Q4 2016.

After posting losses of $46m in Q3, Kodak chief executive Jeff Clarke called for “immediate action” to cut costs, including shedding jobs.

In a call to investors as the full-year results were made public late last week, Kodak chief financial officer David Bullwinkle said: “In the fourth quarter, we accelerated our cost reduction actions across the company to eliminate approximately 425 positions for a savings of approximately $45m on a run-rate basis. Currently, 260 positions have been eliminated with an annual cost savings of £20m.

“Actions have been taken to eliminate an additional 155 positions in 2018 which, combined with other employee-related actions, will result in a savings of $18m.

“We will continue to execute on position eliminations in the first half of 2018 to deliver the targeted savings. Our total headcount will be approximately 5,600 after these reductions. We will continue to achieve higher levels of efficiency in 2018 through cost opportunities and business process simplification and relentless focus on shortening the payback periods on investments.”

Kodak said its full-year revenue decline was driven by volume and pricing declines within its print business, and volume declines in its consumer inkjet and industrial film and chemicals businesses.

“In 2017, we experienced headwinds in our PSD [Print Systems Division] business, associated with macroeconomic conditions with the price of aluminium, overall slowdowns in the commercial print industry and competitive pricing pressures. We were also impacted by a decline in our industrial film business,” said Clarke.

He said the company had taken “decisive actions” to address these factors, including a worldwide plate price increase of 4% to 9% announced in September.

The manufacturer said key product lines, including the Kodak Flexcel NX plates line in the Flexographic Packaging Division (FPD), continue to do well, with volume for the product line growing by 17% year-on-year. The Kodak Sonora Process Free plates line, meanwhile, grew by 21% year-on-year.

Clarke said the packaging business is “well-positioned for continued double-digit growth in both revenue and EBITDA for 2018”.

He added profitability was achieved in the Enterprise Inkjet Systems Division (EISD) and delivered 13% Prosper annuity growth.

Furthermore, he said: “We are in multiple processes with strategic and financial buyers to achieve monetisations, which will sharpen our focus and deleverage Kodak. Based on the sensitive nature of negotiations and confidentiality, we are not able to comment further on specific businesses, partners or timelines related to these strategic activities.”

Kodak recently announced its KodakCoin cryptocurrency venture, in partnership with WENN Digital. Clarke said: “This brand licence partnership demonstrates our strategy to monetise and grow the Kodak brand in new ways, and our belief that innovative blockchain technology will have a significant impact on image rights management.”

The company’s cash balance at the end of the year was $344m, down 21% from $434m in 2016. Kodak said it used cash to invest in strategic growth businesses, fund working capital needs, meet legacy cash obligations and service and prepay debt.

By division, full-year revenue for PSD was $942m, down 7% year-on-year, EISD revenue was $144m, down 13% year-on-year, FPD achieved revenue of $145m, up 10% on 2016, and the Software and Solutions Division (SSD) recorded revenue of $85m, down 6% on 2016.

Revenue in the Consumer and Film Division (CFD) was $198m, down 10% year-on-year, Advanced Materials and 3D  (AM3D) recorded revenue of $1m, flat with the prior year, while the Eastman Business Park Division (EBPD) achieved revenue of $16m, up 7% year-on-year.

The manufacturer – which has also recently unveiled the Nexfinity, the next evolution of its NexPress sheetfed digital platform – expects its overall 2018 revenue to be between $1.5bn and $1.6bn.

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