Kodak's earnings plummet 38 percent Dip in film prices, rising dollar affect 4th quarter

Photographic products

January 16, 1998|By BLOOMBERG NEWS

ROCHESTER, N.Y. -- Eastman Kodak Co.'s fourth-quarter earnings tumbled 38 percent amid lower film prices and a rising dollar, before charges to restructure its business and cut jobs resulted in a final loss.

Profit from operations at the world's largest photo company dropped to $246 million, or 76 cents a diluted share, from $395 million, or $1.19, in the year-earlier quarter.

Sales fell 12 percent to $3.78 billion from $4.31 billion, and Kodak warned it will be "extremely difficult" for its first-quarter profit to exceed last year's.

The fifth straight decline in quarterly profit comes as Kodak cut 20 percent of its work force to compete with rival Fuji Photo Film Co.'s lower film prices. Investors expressed concern that Kodak is earning less in its traditional film business and losing more than first expected to make digital imaging products.

"Kodak is in trouble, because its digital cameras aren't profitable, and conventional film prices are dropping," said John Gavin, an analyst at American Express Financial Advisors, which held 1.12 million Kodak shares at the end of September.

The latest results beat the average estimate of 75 cents a share from 10 analysts surveyed by IBES International Inc. Kodak's shares fell $1 to close at $58.50 yesterday. The share price has fallen about 28 percent in the past year.

Kodak noted that its share of the U.S. consumer photographic film market fell 3 to 4 percentage points in 1997, but it recouped some of its summertime share loss in the fourth quarter.

Kodak said U.S. consumer film sales rose 2 percent in the fourth quarter, conflicting with recent analysts' forecasts of falling sales.

Costs declined 5.9 percent.

A $1.5 billion charge to cut 16,600 jobs, write down the value of assets and restructure led to a loss of $744 million, or $2.29 a share.

A year earlier, charges and losses from asset sales totaling $508 million for restructuring were offset by $277 million in profit from discontinued operations to result in fourth-quarter net income of $164 million, or 48 cents a share.

Kodak's losses from digital imaging, which captures pictures electronically instead of using film, totaled $130 million in the quarter and $440 million for all of 1997 -- after the company indicated in November that the 1997 loss would total about $400 million. Kodak also said that, if the dollar stays at its current level, first-quarter 1998 sales would fall by $75 million, or 15 cents a share.

Last year's fourth-quarter revenue total included part of a copier business that Kodak sold in December 1996 to Danka Business Systems PLC.

Excluding the copier business and the "adverse" effect of a rising dollar, sales were unchanged, Kodak said. The dollar trimmed full-year revenue by $558 million, the company said.

Sales in Kodak's consumer imaging division, which supplies film, paper and photofinishing services, fell 5.7 percent to $1.98 billion from $2.1 billion.

On the commercial side, sales fell 19 percent to $1.8 billion from $2.23 billion. Excluding the copier business, sales fell 4 percent.

For the year, Kodak's profit from operations rose to $1.15 billion, or $3.52 a diluted share, from $1.52 billion, or $4.50, in 1996.

Pub Date: 1/16/98

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