Kodak sets more job cuts on film woes

NEW YORK - Eastman Kodak Co has posted its third quarterly net loss in a row and said it would cut up to 10,000 more jobs as it struggles with the collapsing traditional film market.

Even after excluding one-time items, Kodak posted a profit sharply below Wall Street estimates as film sales fell faster than expected as digital cameras made further inroads, including in emerging markets. Kodak's shares fell as much as 10 per cent.

"Clearly, operations are on a downward slide at Kodak," said Tim Ghriskey, chief investment officer at Solaris Asset Management.

"In traditional film, not only is the market in decline, but they face very aggressive price competition. Also, the digital camera (market) is not growing like it had been."

Since late 2003, Kodak has been mired in a costly plan to shrink its operations in a move to become a digital electronics company and shed its dependence on the film market. The world's top maker of photographic film, it has already cut over 13,000 jobs.

Kodak, which in January 2004 said it would cut its work force by up to 15,000 jobs, said it now plans to slash a total of 22,500 to 25,000 jobs. At the end of 2004, Kodak had some 54,800 employees, down from 64,000 at the end of 2003.

"Our disappointing start in the first half of this year makes it clear that I need to make some changes, and make them now," Kodak chief executive Antonio Perez said on a conference call with analysts.

"We cannot continue with this bleeding year after year. We have designed the end of the process and will execute between now and 2007."

Perez, who became CEO in June, said the decline in sales of traditional film and related services has been led by emerging markets.

"Kodak had counted on emerging markets to provide some growth, but even that is starting to decline in certain geographies," said analyst Shannon Cross of Cross Research.

Sales of film and processing services generate cash used to fund Kodak's switch to digital products such as cameras and commercial printing.

Rochester, New York-based Kodak posted a second-quarter net loss of US$146 million ($219.18 million), or 51 cents a share, compared with a net profit of US$136 million, or 46 cents a share, a year earlier.

Revenue rose to US$3.69 billion from US$3.46 billion, primarily because of two recent acquisitions. Sales of film products fell 15 per cent to US$1.84 billion.

Excluding costs related to restructuring and other one-time items, it had a profit of 53 cents a share, far below analysts forecast for a profit of 79 cents a share.

The increased job cuts will include some 7000 manufacturing jobs and result in total charges of US$2.7 billion to US$3 billion, up from the US$1.3 billion to US$1.7 billion announced originally, the company said.

Kodak said it will also reduce its traditional manufacturing assets, including plants, factories and other equipment, to about US$1 billion, compared with US$2.9 billion in January 2004.

"Every single plant that we have in the world... especially the ones that are working on traditional consumer film, they are going to be affected by this," Perez said. He said the new cuts would save Kodak about US$800 million on an annual basis.

Kodak, however, said its digital efforts are succeeding. Second-quarter digital sales rose 43 per cent to US$1.84 billion, and June digital revenue exceeded that of traditional film on a monthly basis for the first time.

Kodak's bonds weakened on the earnings, and the cost of protecting the company's debt against default rose.

Kodak bonds paying 7.25 per cent interest, due 2013, fell 1.375 cent on the dollar to 103.625 cents on the dollar. The cost of protecting Kodak's debt against default for five years rose 0.15 percentage point to 190 basis point, or US$190,000 a year for every $10 million of principal protected.

Shares of Kodak fell US$2.14 to US$26.60 in afternoon trade on the New York Stock Exchange, off an earlier low of US$26.00.

- REUTERS