CME Posts $41 Million Loss as Advertisers Balk at Higher Prices
Central European Media (CETV) Ltd., the eastern European broadcaster partly owned by Time Warner Inc., posted a second-quarter loss after clients in its main market resisted higher ad fees and the company pursued a debt buyback.
The net loss for the three months ended June 30 was $41.1 million, compared with a profit of $3.1 million a year earlier, the Hamilton, Bermuda-based company said in a statement today. Revenue declined 15 percent to $180.2 million.
“Lower revenue in the Czech Republic impacted our financial results in the second quarter and first half of 2013 as certain key advertisers have only recently accepted our higher prices,” Chief Executive Officer Adrian Sarbu said in the statement. “We expect the declining trend of TV advertising spending to reverse in the fall of 2013, building on our price initiatives.”
The company, which operates in the Czech Republic and five other eastern European states, increased advertising prices and fees in most of its markets this year to reverse a trend of declining revenue from TV ad spending. The broadcaster has also been selling shares and cutting costs to reduce its debt.
“The results are slightly negative, as expected, so there shouldn’t be a dramatic market reaction,” Tomas Mencik, an analyst at Cyrrus AS, said by phone. “However, there still may be a profit warning coming later today during the conference call.”
CME, as the company is known, said on April 29, that it expected 2013 revenue to be between $750 million and $770 million. It saw operating income before depreciation and amortization, or Oibda, at between $100 million and $120 million.
Oibda for the second quarter was $7.1 million, compared with $47.1 million a year earlier, the company said today.
CME shares fell 0.4 percent, or 0.25 koruna, to 67.15 as of 10:52 a.m. in Prague trading.
The company raised $200 million in a private stock placement to Time Warner in April. It plans to use that cash and $100 million from a public share offering to repurchase some of its 2016 notes to cut debt servicing costs, it said on June 24.
Time Warner, its largest shareholder, holds shares that constitute 49.9 percent of voting rights in the company.
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