Kodak: Financial situation and future

Portra 400VC

I know this blog is about film photography and that talking about financial stuff isn’t actually photography 🙂 , but as Kodak is second biggest maker of film, then i think it actually can be fitted under film photography.

Now there quite a hubbub after latest “Credit line” event. But let`s take a look at Kodak recent financial reports.  In first six months of this year Kodak has lost 425M $, while their revenue were (total amount of sales)  2,8 billion dollars. Basically for every 7 dollars of products they sell, they are losing a dollar. Thing is that only part of Kodak which is either flat or making money is “Film, Photofinishing and Entertainment Group” – it lost only 15M in first quarter and now made 2M for second quarter. While digital camera group lost 260M this half-year and “Graphic Communications Group” (mostly inkjet and industrial printers) lost 116M, twice the amount o loses it had same period last year.  While film has lost almost half of revenues and most of the profits it had few years back it`s still best part of Kodak, because of one very big reason and that reason is called HOLLYWOOD.  Almost all movies are shot on film and almost all Hollywood movies are shot on Kodak motion picture films and Panavision camera and lenses, a “match made in heaven” you would say. On other note Kodak  digital camera group made a hefty profit in last year especially Xmas season, but it won`t be happening this year. Seriously do you know anyone who shoots Kodak camera? I don`t. But i do know people who shoot Fuji cameras.

Let`s continue talking about other filmmaker – Fuji. Firstly Fuji is a much bigger company than Kodak. Their revenues for  fiscal year which ended on 31st of march was just short of 27 billion dollars and they made profit of 770 million dollars last year. Fuji`s “Imaging solution” division only account about 14% of revenues, and this also includes digital cameras, chemistry, photo labs aka “Frontier” and paper, not just film. Even if in this segment business is going badly Fuji still has Information solutions and Document solutions, both of whom makes up more than 40% each . Because of heavy restructuring in all areas (cutting down work force, stopping production of financial unsuccessful products) Fuji is now making money, apart from Kodak. For example Kodak`s most recent cut in film production were just several  B&W films for 8×10 format and cancelling Kodachrome, which should have been cancelled 10 or 15 years back.  Fuji as you all know are canceling production of different films time from time, OK it`s not pretty but at least they survived and will continue to make films like Velvia and Provia.

So what about Kodak, what future holds for them? By taking credit of 160 million dollars they are hoping to get enough money to last them till x-mas season.  Then if x-mas season will be good to them they will sell or split company afterwards, hopefully at higher price than Kodak is worth now. Yes you read correctly Kodak will go down shortly, sad but true. They are losing too much money for restructuring to help, their printers and cameras are uncompetitive, which were their hope for financial stability, to able to sell them Kodak must cut their prices to almost manufacturing cost, that is why their Gross margins are only little bit over 10%.  So either they split up company in separate divisions, probably selling some parts of company, for example Digital camera business could be sold to LG, it`s the one of few consumer electronic giants without camera business. Or Kodak will be sold as a whole company, either way it will end with heavy workforce and product cuts.

Interesting question would be if Kodak will stop making Portra, will Fuji be making Astia or Sensia again as a their high-end portrait films?

Tune in for more “good” news at end of October.

So my suggestion for those who shoot Kodak films would be to stockpile film, especially rare ones, as most of them could be discontinued, although T-Max and Portra probably will stay.

P.S. Both Moody and Standard & Poor (S&P) gave negative outlook for credit quality to Kodak, and grades are turning from B- to C.


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