Bloomberg News

Central European Media Operating Profit Rises on Advertising

October 26, 2011

(Updates with additional company comment from sixth paragraph, adds share price.)

Oct. 26 (Bloomberg) -- Central European Media Enterprises Ltd., the owner of television stations across central and eastern Europe, returned to profitability at the operating income level, helped by currency swings and “mixed recovery” in advertising spending.

Operating income before appreciation and amortization for the three months ended Sept. 30 was $8.9 million from a loss of $4.5 million a year ago, the Hamilton, Bermuda-based company said in a regulatory filing today. Revenue rose 23.2 percent to $165.5 million, exceeding an estimate of $153.6 million by six analysts in a Bloomberg survey.

Chief Executive Officer Adrian Sarbu reiterated full-year forecasts of approximately $850 million in revenue and Oibda of $166 million for 2011. “Cash flow generation” and “audience leadership” remain the main priorities, Sarbu said in the statement.

Advertising Demand

Central European Media, or CME as the company is known, has been battling a slower-than-expected pick up in advertising spending in all its markets as the economies in the region emerge from recession. Overall television advertising spending across all six CME’s markets grew 1 percent in the third quarter.

Advertising will probably expand 2 percent in the company’s markets as a whole in the fourth quarter, company officials said on a conference call. For the next year, markets are expected to remain “challenging” as advertising revenue will be slow to rebound in the current economic environment and controlling costs will be a priority, Sarbu said on the call.

Central European Media rose 5.8 percent in Nasdaq trading to $11.40, paring this year’s loss to 44 percent.

“The summer programming season is seasonally the weakest quarter, however strong local currencies and mild recovery across ad markets improved the results,” Ceska Sporitelna analyst Vaclav Kminek wrote in a note to clients. “All in all CME performed well and we can expect a positive market reaction.” Kminek recommends investors “buy” the shares.

Komercni Banka AS analysts said they will update their target price of $25 and recommendation of “buy” soon, as the company’s shares are “now deeply below” Komercni’s estimates.

Regional Operator

CME operates TV channels in the Czech Republic, Bulgaria, Romania, Croatia, Slovakia and Slovenia. After dropping unprofitable assets in Ukraine in 2010, it agreed to acquire a Bulgarian channel. It also bought Bontonfilm AS, a Czech distributor of movies, for $11 million.

CME, owned by Ronald Lauder, reported a net loss from continuing operations of $82.2 million, or $1.27 a share, compared with a net profit of $3.4 million, or 5 cents a share, for the third quarter of 2010 on a one-off loss of 45.9 million linked to a currency swings.

--Editor: Douglas Lytle

To contact the reporter on this story: Douglas Lytle in Prague at

To contact the editor responsible for this story: James M. Gomez at

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