Axel Springer Drops After Cutting Forecast on Print Weakness

Updated on
  • Second-quarter revenue rises less than 1%, trailing estimates
  • Company expanding its online business to offset print drop

Axel Springer SE, publisher of Germany’s Bild tabloid newspaper, fell as much as 3.2 percent after lowering its full-year sales forecast because of declining revenue from its print products.

Axel Springer “now expects a stable development instead of the slight growth that was originally forecast,” the publisher said in a statement Wednesday. Second-quarter sales rose less than 1 percent to 802 million euros ($899 million), compared with the average analyst estimate of 804 million euros.

“The negative trend in classic print businesses seems to accelerate slightly,” Harald Heider, an analyst at DZ Bank AG who rates the stock buy, said in an e-mailed note. “We expect further solid organic and external growth in the area of classified models.”

Axel Springer is pushing into the web and English-speaking markets like the U.S. and Britain to offset a decline in print sales caused by readers and advertisers moving online. The publisher, which generates about 85 percent of its ad revenue from digital businesses, in June agreed to buy market researcher EMarketer Inc.

The shares fell 3.1 percent to 47.32 euros at 1:10 p.m. in Frankfurt. They’ve lost about 8 percent this year.

Britain’s decision to leave the European Union, the political unrest in Turkey and the spate of terror attacks in recent weeks is adding "uncertainty to any outlook,” Chief Executive Officer Mathias Doepfner said on a call with analysts. The company is set to make fewer acquisitions in the coming years to focus on execution and organic growth, he said.

Brexit Impact

While advertisers in the U.K. are now focusing more on short-term contracts because of Brexit, reducing visibility, business in continental Europe “should more than compensate that,” Chief Financial Officer Julian Deutz said on the call. Axel Springer generates about 12 percent of its sales in Britain, mainly through job portals such as StepStone, he said.

Axel Springer said the 2016 sales forecast is affected by “deconsolidation” in Switzerland, where the company is integrating its business into a joint venture with Ringier AG.

The publisher confirmed its full-year profit forecast after reporting earnings before interest, taxes, depreciation, and amortization of 147 million euros in the second quarter.

The company’s performance in online classifieds is "reassuring,” after the segment’s margins improved by about 3 percentage points to 41.7 percent in the second quarter, Markus Diebel, an analyst at JPMorgan Chase & Co., said in an e-mailed note.