Canwest and Corus see impact of slowing economy
OTTAWA (Reuters) - Canwest Global Communications Corp and Corus Entertainment Inc said on Wednesday they expected to feel the impact of a slowing economy on advertising spending.
Canwest, which publishes daily newspapers across Canada, warned that it may fall short of some financial covenants in its credit facilities if tough economic conditions persist. It also posted a quarterly loss after a year-earlier profit, and the news sent its shares down as much as 35 percent.
Corus, which owns television and radio assets as well as the Nelvana animation house, lowered its forecasts for its fiscal 2009 to reflect an expected slowdown in advertising, even as it reported higher profit for the quarter ended November 30.
Canwest, whose businesses include the Global television network and TV operations in Australia through Network Ten, said it would consider selling assets and cutting costs to reduce debt and improve profit.
The company, along with an affiliate of U.S. investment bank Goldman Sachs, bought Canadian specialty-TV company Alliance Atlantis for C$2.3 billion ($1.88 billion) in 2007.
Based on current revenue and expense projections, Canwest said it may be unable to comply with quarterly financial leverage ratio covenants in 2009, particularly a senior facility at Canwest Media Inc. The company said it will work to improve profit and reduce debt so that it could comply.
"We believe that we have a number of actions that can be taken," John McGuire, Canwest's chief financial officer, said during a conference call with analysts. He declined to elaborate.
In November, the Winnipeg, Manitoba-based publisher of the National Post newspaper said it would shed 560 jobs, or about 5 percent of its work force.
Canwest's large exposure to the advertising market has made it particularly vulnerable to Canada's economic downturn. Many companies trim back their ad budgets during a recession, translating to lower revenue for media groups like Canwest. Continued...