UPDATE 2-RR Donnelley Q2 profit dips, sees modest sales growth

Wed Aug 5, 2009 12:47pm EDT

* Sees modest sequential sales growth in Q3

* Q2 EPS, excl items, $0.37 vs est $0.29

* Sales $2.36 bln vs est $2.40 bln

* Ups FY free cash flow view to $1 bln

* Shares fall as much as 5 pct (Recasts; adds conference call details, share movement)

Aug 5 (Reuters) - Printing services firm R.R. Donnelley & Sons Co (RRD.O) reported an 83 percent fall in quarterly profit, hurt by charges and a drop in revenue from its U.S. business segment as end-market demand slowed.

R.R. Donnelley, which shifted its listing to Nasdaq effective Wednesday, said it expects a "modest" sequential sales growth in the third quarter.

"We believe that the toplines reflect the overall softness of the global economy, not decisions by customers to take their business elsewhere," Chief Executive Thomas Quinlan said on a conference call with analysts.

R.R. Donnelley said it expects free cash flow generation of about $1 billion for the full year, up from its earlier forecast of $700 million.

The company earned $25.2 million, or 12 cents a share, for the quarter, compared with $145.1 million, or 68 cents a share, a year ago.

Excluding special items, it earned 37 cents per share. Analysts on average had expected earnings of 29 cents per share, according to Reuters Estimates.

Sales fell 20 percent to $2.36 billion in the quarter, missing analysts' view of $2.40 billion.

Net sales for the U.S. print and related services segment fell 18 percent to $1.78 billion due to volume and price declines across all products and services, the company said.

In June, R.R. Donnelley abandoned its offer to buy insolvent Canadian rival Quebecor World IQW.TO for about $1.5 billion. [ID:nN10338012]

Shares of the Chicago-based company were down more than 4 percent at $13.82 in midday trade on Nasdaq. They touched a low of $13.70 in morning trade. (Reporting by Brenton Cordeiro in Bangalore, Editing by Aradhana Aravindan and Gopakumar Warrier)

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