January 14, 2009 / 2:09 PM / 9 years ago

Canadian media companies hurt by economic slowdown

OTTAWA (Reuters) - Canada’s economic slowdown has squeezed advertising spending and hurt quarterly financial results for Canadian media companies, triggering warnings of weaker results and credit problems.

Canwest Global Communications Corp, which owns daily newspapers in every large urban market in Canada, said it may fall short of certain financial covenants in its credit facilities if negative economic conditions persist.

The company, which also owns Canada’s 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.

Canwest, along with an affiliate of U.S. investment bank Goldman Sachs, bought specialty TV company Alliance Atlantis for C$2.3 billion ($1.88 billion) in 2007.

Based on current revenue and expense projections, Canwest said that it may be unable to comply with quarterly financial leverage ratio covenants in 2009. The company said it will work to improve profit and reduce debt in order to comply.

In November, the Winnipeg, Manitoba-based company announced it would shed 560 jobs, or about 5 percent of its work force.

Canwest’s has large exposure to the advertising market, which has been sagging amid the economic downturn. Many companies trim back their ad budgets during a recession, which translates to lower revenue for media groups like Canwest.

In the quarter that ended November 30, Canwest posted a loss of C$33 million, compared with a profit of C$41 million in the same period last year as revenue increased 2 percent to C$886 million.

Media and entertainment company Corus Entertainment Inc lowered its fiscal 2009 forecast on Wednesday, despite a higher quarterly profit, due to an expected slowdown in advertising revenue.

Corus, which owns television and radio assets as well as the Nelvana animation house, expects to earn C$255 million to C$265 million in 2009, down from a previous estimate of C$270 million to C$280 million.

The company’s free cash flow outlook was unchanged at C$70 million to C$90 million.

Corus’ fiscal first-quarter profit rose to C$40.6 million from C$39.4 million a year earlier.

Cogeco Cable Inc proved the exception to dour results, reporting a stronger quarterly profit helped by growth in its Canadian operations.

Its earnings rose to C$23.6 million from C$20.4 million a year earlier, as revenue increased nearly 19 percent to C$299.4 million.

Reporting by Susan Taylor; Editing by Derek Caney

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