January 14, 2009 / 2:09 PM / 10 years ago

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.

The CanWest Global building is seen on Portage Avenue in Winnipeg, MB in this November 14, 2008 file photo. The company posted a quarterly loss as the slower economy and lower advertising volume dragged on results, the company said on Wednesday. REUTERS/Fred Greenslade

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.

For 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 a year earlier. Revenue increased 2 percent to C$886 million.

By mid-afternoon the shares were down 31.3 percent at 55 Canadian cents on the Toronto Stock Exchange. The stock has lost about 90 percent of its value in the last 12 months.


Corus said it now expects to earn C$255 million ($206 million) to C$265 million in 2009, down from a previous estimate of C$270 million to C$280 million.

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

Corus shares were off 3.6 percent at C$11.95.

Another media company, Quebec-based Cogeco Cable Inc, largely escaped the impact of a souring economy, 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.

Cogeco Cable’s shares were up 3.5 percent at C$33.33.

“Historically cable has been relatively unimpacted (by the economy) because of the subscription-based revenue model rather than the ad-based revenue model,” said Dvai Ghose, an analyst at Genuity Capital Markets.

Astral Media, a Montreal-based television and radio group, also dodged the downturn, helped by a big gain in sales and profit from its Standard Radio assets, which it had acquired last year.

Earnings rose to C$42.4 million ($34.5 million) from a profit of C$37.5 million as revenue rose 24 percent to C$244.5 million. Astral became Canada’s biggest radio broadcaster when it bought Standard Radio for C$1.1 billion.

($1=$1.24 Canadian)

Reporting by Susan Taylor in Ottawa and Scott Anderson in Toronto

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