Bloomberg News

Televisa 2nd-Quarter Profit Slides 12% on Ad Slump

July 23, 2007

Grupo Televisa SA (TLEVICPO), the world's largest Spanish-language broadcaster, said second-quarter profit fell 12 percent as advertising slumped.

Net income fell to 2.03 billion pesos ($188 million) from 2.31 billion pesos a year earlier, without adjusting for inflation. Sales were little changed at 9.81 billion pesos, Televisa said today in a statement. Analysts projected 9.71 billion pesos in sales and 2.21 billion pesos in net income, the averages of four surveyed by Bloomberg News.

Advertising revenue for the Mexico City-based company declined from last year, when World Cup soccer and Mexico's presidential election helped Chief Executive Officer Emilio Azcarraga increase profit to a seven-year high. Ad revenue also fell as Mexican retail sales rose 1.9 percent in May, government figures show.

``We were expecting a very difficult quarter, and it doesn't seem too bad given the comparison,'' Raul Ochoa, an analyst for Scotia Capital, said in an interview from Mexico City. Profit margins exceeded his estimate even as sales fell in television advertising, as expected, he said.

Shares of Televisa fell 30 centavos to 59.41 pesos today in Mexico City trading. They have gained 1.6 percent this year, compared with a 22 percent rise in the benchmark Bolsa index.

Broadcast Division

Sales in broadcast television, the company's largest division, fell 12 percent to 4.94 billion pesos from 5.62 billion pesos a year earlier, when soccer's biggest tournament boosted ratings and the closest presidential election in Mexican history led to a surge in campaign ads.

``An unexpected slowdown in consumption in Mexico provoked a decrease in advertising revenue during the quarter,'' the company said in the statement

Sales in the cable television division rose 22 percent to 585.4 million pesos as the number of subscribers increased 15 percent to 527,000 and the company raised prices an average 3 percent in March.

Satellite TV sales gained 12 percent to 2.03 billion pesos, also buoyed by new subscribers. Televisa's Cablevision began selling digital telephone service in Mexico City on July 2.

Profit margins narrowed as Televisa spent more developing new television series outside its traditional sports and soap opera programs, Deutsche Bank analyst Miguel Garcia wrote in a report last week.

Profits were reduced as Televisa lost 258 million pesos in foreign exchange, as it held more U.S. dollars than usual and the peso appreciated versus the U.S. currency. The company had gained 420 million pesos in foreign exchange last year as the peso depreciated versus the dollar, the company said.

Televisa said it spent 1.65 billion pesos buying back its own shares during the quarter. That was 85 percent more than in the first quarter.

To contact the reporter on this story: William Freebairn in Mexico City at wfreebairn@bloomberg.net

To contact the editor responsible for this story: Jennifer Sondag at jsondag@bloomberg.net


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