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McClatchy squeezes out Q2 profit

Post by John Gillie / The News Tribune on July 28, 2011 at 11:11 am with No Comments »
July 28, 2011 11:12 am

In spite of falling advertising and circulation revenues, the nation’s third largest newspaper chain, The McClatchy Company, reported today it remained profitable in the second quarter.

The company, parent of The News Tribune and the Olympian among other newspapers, said its profit for the quarter ending June 30 was $4.9 million on revenues of $314.3 million.

Revenues in last year’s second quarter were $342 million, and profits were $7.3 million.

Excluding special expenses such as severance payments for laid off workers and other one-time charges, the company’s profits for the second quarter were $9 million compared with $8.5 million for 2010’s second quarter.

Gary Pruitt, chairman of the Sacramento-based newspaper chain, blamed the shrinking profits on a continuing decline in advertising revenues. Those revenues fell by 9.4 percent in the second quarter compared with 11.1 percent in the first quarter.

Particularly disappointing were national advertising revenues, which fell by 21.6 percent in the quarter, he said. About half that decline came from telecommunications companys which cut their advertising. Real estate classified advertising was also down by 20.2 percent as the nation’s housing market remains mired in a depressed state.

On the positive side, digital-only advertising rose by 9 percent in the quarter. Sunday circulation increased by .7 percent and daily average unique visitors to the company’s Websites rose by 5.5 percent. The company’s results from equity investments in such digital properties as CareerBuilder, and are growing, the company said.

Digital advertising now makes up about 20 percent of the company’s advertising dollars.

The recovery remains uneven throughout the country, said Pruitt, with Florida showing some signs of revival, but California, where McClatchy owns several papers, still solidly in distress.

Advertising trends so far in July are about at the same level as during the second quarter, the company’s CEO said.

The company intends to reduce cash expenses in the third quarter despite the impact of higher newsprint costs, he said. Newsprint prices are up 23.8 percent.

The company, which already has been through several rounds of layoffs and cost reductions, is still focused on keeping expenses low, said McClatchy executives.

One analyst asked Pruitt in what inning in the cost reduction game would he put the company.

“It feels like the 19th inning,” said Pruitt.

At some point, the company business model will stabilize, he predicted.

“I’m hopeful we’re much closer to the end than to the beginning,” he said.

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