Kodak puts flexo business up for sale

By Jo Francis, Friday 10 August 2018

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Kodak has put its fast-growing Flexographic Packaging Division up for sale as it strives to find a solution to looming debt repayments.


Kodak's Flexcel plate technology is used for a wide range of products

Alongside its Q2 results the manufacturer confirmed that it had appointed UBS Investment Bank as adviser on the sale.

Chief executive Jeff Clarke said that Kodak had already been approached by potentially interested parties about the division, previously lauded as one of Kodak’s key growth engines, which posted sales of $150m (£117.5m) and operational EBITDA of $33m last year. Sales at the unit were up 9% in Q2.

Flexcel plates account for approximately 70% of sales at the unit, which employs around 300 staff.

Clarke described the move as a “great opportunity to unlock value for shareholders”.

He said: “This business is an excellent example of Kodak incubating and bringing disruptive innovation to the marketplace. Kodak has been evaluating monetisation opportunities for the last several years in order to deleverage the company and we believe this is the right time to monetise this valuable asset.”

There had been speculation over recent months that Kodak was planning to sell off some of its assets, with the flexo business and its Prinergy workflow system both mooted as potentially for disposal.

Kodak had previously tried to sell its inkjet business without success, and reversed that decision last year

The manufacturer also announced that it had entered into a non-binding agreement with one of its existing lenders for a $400m loan over 18 months that could be used to refinance its existing debt over the period of the sale process.

In a financial filing Kodak acknowledged that it was facing liquidity challenges due to negative cashflow. “Based on forecasted cashflows, there are uncertainties regarding Kodak’s ability to meet commitments in the US as they come due,” the firm said.

It has $395m of loans that fall due on 3 September 2019.

The group has also downgraded its profit forecast for the year after taking a big hit on aluminium costs, and has announced plans for further cost-cutting and restructuring.

Chief financial officer David Bullwinkle commented: “We plan to reduce operating costs significantly to improve liquidity, refinance the existing term loan and sell the Flexographic Packaging Division to mitigate this uncertainty.”

He said the firm had begun actions to save $40m a year in costs.

Overall sales in the three months to 30 June were down $9m at $372m, while operational EBITDA fell 25% to $9m.

Kodak reported a $7m year-on-year hit due to aluminium price increases.

Sales at its Print Systems Division, which includes plates and is Kodak's biggest operation, fell by $9m to $227m, while operational EBITDA almost halved, falling from $15m to $8m.

Overall plate volumes were down 5% year-on-year, and Clarke said the increased rate of decline was the result of “a strategy shift with several large dealers”.

The bright spot was Sonora process-free plates, where sales were up 19%.

Operational EBITDA at Kodak’s Enterprise Inkjet Division was flat at $1m, and sales slipped from $35m to $33m; while its Software & Solutions Division remained loss-making, posting a $1m operational EBITDA loss on sales down $2m to $20m.

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