(Reuters) - Canadian newspaper publishers Torstar Corp and Quebecor Inc delivered more bad news to investors on Wednesday, saying that cost cuts were failing to keep pace with an accelerating decline in print media revenue.
Torstar shares fell as much as 9 percent to a three-year low after it reported a worse-than-expected 76 percent drop in first-quarter profit and a 6 percent fall in revenue from its media business.
Quebecor, whose shares fell as much as 6 percent, said profit fell by half as revenue from its print media business declined 11 percent.
Torstar, the owner of Toronto Star, Canada’s largest newspaper by circulation, said it had cut 105 jobs in the quarter and would look for further cost cuts as the year progressed. The company cut 260 jobs in 2012.
It said print revenue was declining steadily and there were few signs of a recovery in the near future.
Torstar’s net income plummeted to C$4.2 million, or 5 Canadian cents per share, from C$17.5 million, or 22 Canadian cents per share, a year earlier.
Its media business accounted for 70 percent of total revenue of C$313.1 million in the quarter.
Torstar, which also owns the Harlequin brand of romance novels, said higher royalty rates paid to authors and lower sales also hurt its overall profit.
Quebecor — whose titles include the Toronto Sun, the Calgary Sun and le Journal de Montreal — cut 500 jobs in its media business in November.
News media, including print and TV, contributes about a fifth of Quebecor’s total revenue.
“Unfortunately, in the news media segment, the latest cost-containment initiatives did not make up for the decrease in revenues during the quarter, which was more significant than in previous periods,” said Pierre Karl Peladeau, chairman of Quebecor’s media business.
However, the Montreal-based company also has a large telecommunications business and owns the French-language TV network TVA Group, limiting its exposure to the declining print media industry.
“Quebecor’s news media business luckily is a fraction of the telecom business,” Canaccord Genuity analyst Dvai Ghose told Reuters. “While it has been a consistent disappointment, it’s becoming less and less material.”
Pierre Karl Peladeau, son of Quebecor founder Pierre Paladeau, was chief executive of Quebecor until March, when he stepped down to take charge of the media division.
Quebecor has already started charging for online content, while Torstar said on Wednesday it would erect paywalls early in the third quarter.
Quebecor’s first-quarter profit slump was partly attributed to lower gains on financial instruments.
The company’s net income attributable to shareholders fell 50 percent to C$35.6 million, or 49 Canadian cents per share.
On an adjusted basis, it earned 53 Canadian cents per share, falling short of the average analyst estimate of 62 Canadian cents per share.
Revenue from the telecommunications business, which accounts for over half of Quebecor’s total revenue, rose 4 percent.
Torstar’s shares were down 3.33 percent at C$6.37 in early afternoon trading. Quebecor’s shares were down 3.5 percent at C$45.06.
Reporting by Krithika Krishnamurthy; and Ankur Banerjee in Bangalore; Editing by Sreejiraj Eluvangal, Ted Kerr