13 November 2016 Business

Kodak aims for 'significant realisation" from Prosper

Prosper should net Kodak a sizeable sum to further reduce its borrowings and boost the balance sheet.

Kodak continues to rebuild its balance sheet to move away from the high interest support it needed to emerge from Chapter 11 to a much lower cost of finance.

In this regard it has issued $200 million of preferred shares which are being used to repay a $262 million loan. And it will use the money received from the sale of Prosper to repay further debt and so reduce the cost of running the business. The share issue to Southeastern Asset Management comes with a dividend of 5.5% compared to the 10.7% it had been paying, so saving $17 million a year.

In a conference call for the Q3 results, Kodak CEO Jeff Clarke said that proceeds from the sale will be used to pay down debt. “We hope to have a significant realisation” on the sale, he added, explaining “We have enough in our portfolio that we can drive good growth and improvement in profitability without prosper. That’s what the product is up for sale.”

In the quarter, the company places a further three Prosper 6000s, but had to replace four installed machines owing to performance issues. Nevertheless revenues in the Prosper division increased to $29 million ($21 million) in the quarter, but despite a 41% increase in annuity revenues, the cost of replacing equipment and managing other underperformance issues increased the quarterly loss to $9 million.

There are now 63 Prosper presses in operation around the world, 13 higher than a year ago and 1,260 print heads, up from 1,090, at the end of September 2015.

The future is pinned on packaging where there were ten installations of Flexcel NX platesetters and plate volumes increased 13%, well above the 5% growth rates across packaging worldwide. “Packaging is our strongest performing product set,” says Clarke.

The litho plate division will also be relied on to drive growth, particularly Sonora and the Libra VP and Electra Max plates that have been added to the portfolio. Combined these account for 20% of Kodak plate volumes. The slower Chinese market and continuing problems in Latin America mean that plate volumes overall are down 4%.

The print services division generated revenues of $250 million, $28 million down on 2015, but thanks to cost saving measures, operating profit was only $2 million lower at $27 million.

The continuing enterprise inkjet division, which is built around Versamark ink and replacement print heads, accounted for sales of $18 million, unchanged from a year earlier. The micro printing and packaging division increased revenue to $34 million ($32 million), while software fell to $20 million ($30 million). Within this revenues from Prinergy were down $1 million compared to 2015’s Q3 result.

This left corporate revenues at $380 million, excluding Prosper which is counted as a discontinued business. This is lower than the $425 million recored a year ago, with operating profit falling to $35 millions ($47 million).

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Prosper hopes

Prosper hopes

Kodak expects to announce the sale of the Prosper division before the end of the year with the deal completed early next year. The proceeds will be used to reduce debt and allow the company to grow around its packaging, plates and new business areas.

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