Eastman Kodak Co. (KODK:US) is forecasting “double-digit” revenue growth in China this year as it seeks to capitalize on the nation’s demand for technology to spur economic growth, according to its chief executive officer.
The U.S. company is seeing increased demand for digital printing in China as customers move up the value chain to avoid obsolescence, Antonio Perez said in a Jan. 13 interview in Shanghai. Rochester, New York-based Kodak emerged from bankruptcy protection last September as a smaller company making equipment for commercial printing and packaging after selling units including its photographic-film business.
“China desperately needs to move to digital methodologies in printing if they want to keep the position they have as volume manufacturers,” Perez said. “If they don’t business is going to go away from China.”
Kodak is investing in China, including plans to open a training center in Shanghai, on prospects the nation will increase spending in technology as part of reforms aimed at supporting an economy that’s forecast to have expanded at the slowest pace in more than a decade last year.
About 15 percent of Kodak’s revenue is coming from China and that proportion should grow, said Perez, who joined in 2003 and led it through the reorganization. The company seeks growth in China that matches its industry forecast of a 60 percent increase for volume of pages printed digitally by 2015, he said. China is the world’s second-biggest printing market, he said.
Kodak’s shares have rallied (KODK:US) 78 percent in New York trading since September, when the company emerged from Chapter 11.
Kodak, which has three manufacturing plants and a software development center in China, is also partnering with publishers such as Jiangsu Phoenix Publishing & Media Corp. (601928) to print books on demand using the U.S. company’s technology, Lois Lebegue, managing director for Asia, said yesterday. It also plans to set up a training and demonstration center in Shanghai next quarter to help educate customers, he said.
Perez said that while he was “very satisfied” with the government’s economic reforms, he was concerned that “protectionist rules” forcing China’s state-owned enterprises to buy domestically produced equipment could drive foreign companies away. As part of a campaign to promote frugality and reduce waste, the military will stop buying foreign-branded vehicles, the Xinhua News Agency reported Jan. 13.
In November, China’s leaders announced they would allow markets to play a role in allocating resources and encourage private investment in more industries as part of the the biggest expansion of economic freedoms since at least the 1990s. The government pledged last month to tackle local government debt in 2014 amid concern about risks to the financial system.
“My biggest fear about China is what’s going to happen with the debt,” Perez said. “If you look at the government debt and the private debt it’s kind of scary. It’s a big country and it has ways to go around it. It is a bit concerning.”
Government debt, including contingent liabilities, rose to 17.9 trillion yuan ($2.96 trillion) as of the end of June, the National Audit Office said in a December report. In September last year, Finance Minister Lou Jiwei called the scale of local-government debt controllable and said the risk of default was “not great.”
Distribution of its products in China is Kodak’s biggest challenge, Perez said. The nation has more than 100,000 printing companies, which Kodak needs to approach individually as no other marketing channels exist for its equipment, he said.
“We are going for growth, wherever growth is,” Perez said. “It makes sense to believe that a lot of growth is going to be in emerging economies. In that sense China is very important.”
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