Kodak raises prices on film and paper due to niche status

By Courtney Dentch  |   2008-6-2  |     NEWSPAPER EDITION

EASTMAN Kodak Co, the photography company remaking itself in the digital age, is raising prices on film and paper, a premium that customers looking for the traditional medium may be willing to pay.

Kodak said last Friday it is lifting prices by as much as 20 percent after costs for silver, aluminum, plastics and resin added about US$25 million to first-quarter spending. The changes are limited to items relating to the film business, which has faced declining demand as consumers go digital.

"With film becoming more of a niche market, it gives them an opportunity to do this," said Ron Glaz, a program director for Framingham, Massachusetts-based technology research firm IDC. "If someone's looking for film, they're willing to pay more because it's becoming a specialty product."

Chief Executive Officer Antonio Perez is trying to restore profit after a first-quarter loss. The increases hit products at the core of Kodak's historic business, which dates to 1884 and was built on the idea that photographs were taken on film and printed on paper. Such products slipped to about 19 percent of sales last year and fell 13 percent in the first quarter.

Perez is selling more digital cameras and inkjet printers to consumers who record birthdays and vacations on pixels instead of paper, Bloomberg News said.

The company is not alone in facing rising material costs. Higher food, fuel and metals prices helped boost United States consumer prices 3.9 percent in the year ended in April as companies tried to maintain profit margins.

Dow Chemical Co, the largest US chemical maker, said last week it will raise prices the most in its 111-year history. Caterpillar Inc, the world's largest maker of construction equipment, lifted prices to counter steel costs.

Kodak, based in Rochester, New York, fell 19 cents to US$15.32 last Friday in New York. The shares have lost 30 percent this year.

Kodak last month posted a first-quarter loss wider than analysts estimated because of higher material and research costs. The net loss, the first after three straight quarterly profits, narrowed to US$115 million, or 40 cents a share, from US$151 million, or 53 cents, a year earlier. A US$1 increase in the price of silver costs Kodak an additional US$20 million, Chief Financial Officer Frank Sklarsky said last month. Silver futures have jumped 14 percent this year on the Comex division of the New York Mercantile Exchange, reaching a high of US$21.44 an ounce on March 17.