Financial

posted on 22 July 2008 17:41

Imation, the supplier of digital, audio and video storage media, recorded a thumping 32.5 percent rise in its Q2 revenues.

For the quarter ending June 30, 2008, Imation reported revenues of $547 million, passing the half billion dollar level, up from the year-ago quarter's $412.8 million. In that it recorded a negative operating income of -$2.6 million (-$0.04/share) compared to the Q2 '08 figures of $12.2 million ($0.19/share).

Clearly Imation has a long way to go to wring acceptable profit levels from its operations.

Revenue growth was driven by optical and consumer electronic products primarily due to the TDK Recording Media and Memcorp acquisitions which closed in Q3 2007.

Imation announced steps to lower its cost of manufacturing by focusing all tape coating in its Weatherford, OK plant. As a result, the Company will exit its Camarillo, CA facility and incur associated future restructuring and related charges of up to $20 million, the majority of which will be incurred this year.

Imation President and CEO Frank Russomanno said: "While we faced a challenging economic environment during the quarter, especially with our enterprise class customers, our broad product portfolio, multiple brands and global footprint enabled us to deliver an acceptable quarter with strong operating cash flows. The U.S. and Europe were weak especially in magnetic tape; however, we saw strong results in Asia Pacific most notably in Japan and also in Latin America. We also were pleased with our improved margins in optical and flash products, which offset pressure resulting from declines in higher margin tape products."

"Our tape media business experienced continued softness in the quarter driven by declines in legacy data center and entry level formats. We expect this trend to continue. ...We saw growth in optical media driven by our acquisition of the TDK recording media business. Our multi-brand strategy is working as it is enabling us to gain share and improve profitability in an overall declining market. For example, TDK Life on Record has now become the leading optical media brand in Japan."

"Our consumer electronics and accessories business posted strong performance during the quarter and is well positioned for the busy year-end season. We also have a focused effort to expand this business initially in North America. Our recent acquisition of XtremeMac further strengthens our brand and product portfolio and adds a new dimension of product design in consumer electronics and related accessories, especially for Apple enthusiasts. This acquisition is another building block in our strategy as we build a portfolio of strong brands that resonate with consumers."

"We have adjusted our 2008 outlook reflecting the restructuring and related costs associated with our plant exit announced today. Excluding these impacts, we remain committed to our previously communicated 2008 outlook though we are aware of increasing concerns about possible further economic weakness near term. We will continue to closely monitor the external environment and its possible impact on our business as we head into the critical second half."

"The results for the second quarter reflect the initial benefits of our strategy and our operational discipline, further reinforcing our confidence in the long-term value of our strategic direction."

We should hope and expect more of the same; revenue growth matched with more efficient operations driving much improved profitability.

^{[Chris Mellor.]}