UPDATE 2-Torstar profit plunges as advertisers abandon, outlook weak

Wed Mar 6, 2013 10:20am EST

* Publisher of Canada's largest daily newspaper cuts 67 jobs

* Fourth-qtr earnings C$0.30 versus C$0.81 a year earlier

* Revenue falls 7 pct, company could delay dividend increase

* Shares plummet 9 pct in early trading

TORONTO, March 6 (Reuters) - Torstar Corp, publisher of the Toronto Star, Canada's largest daily newspaper, cut 67 jobs and said it would rein in costs in 2013 as the revenue outlook from its main media business remained uncertain.

Its profit and revenue slips in the fourth quarter were worse than anticipated by analysts, and the company warned of continued tough times ahead. Its shares fell almost 9 percent in early trading.

Torstar, like many publishers in North America, has struggled with declining print advertising. It has been investing to create digital content as more readers move online, while also aggressively cutting jobs.

"Costs continue to be an area of emphasis as we resize the cost base in response to the pressures on ad revenue," David Holland, Torstar's chief executive, said on a call with analysts.

He said the company expects to save C$6.6 million a year in labor costs once the job cuts are fully implemented, while early indications point to more print advertising weakness in 2013.

Higher royalties paid to authors for digital sales, and promotional and incentive spending also hurt profit.

RBC analyst Haran Posner said Torstar had suffered another challenging quarter, with the company's community newspapers providing the only positive surprise.

The company, which publishes more than 100 newspapers in Canada, said it could delay its dividend increases as an increased portion of its free cash gets funneled to pension payments.

PROFIT FALLS

Net income attributable to equity shareholders fell to C$24.1 million, or 30 Canadian cents per share, from C$64.3 million, or 81 Canadian cents per share, a year earlier.

Revenue fell 7 percent to C$395.7 million primarily on lower print advertising.

The declines in print revenue were only partially offset by an increase in digital revenue, the company said.

Excluding restructuring and others charges, Torstar earned 49 Canadian cents per share.

Analysts had expected earnings of 53 Canadian cents per share on revenue of C$413.65 million, according to Thomson Reuters I/B/E/S.

Torstar's shares fell 10 percent to C$7.11 in early trading on the Toronto Stock Exchange. They had fallen some 36 percent in the past six months, prior to Wednesday's drop.

The company's Star Media group owns numerous titles including the online newspaper thestar.com, the weekly city magazine The Grid, and the Canadian Immigrant magazine.

The media business accounted for 73 percent of Torstar's operating revenue of C$395.7 million in the fourth quarter.

The company said it cut 260 jobs in 2012.

Canadian media and telecommunications conglomerate Quebecor Inc cut 500 jobs in its Sun Media division in November and said it planned to charge for online access to its articles.

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