Mumbai: Newspaper publishers Deccan Chronicle Ltd and HT Media Ltd are likely to post a marginal rise in net profit as higher newsprint costs ate into margins during the quarter to June, analysts said.
A shortage of newsprint supply because of a consolidation in the global newsprint industry and higher demand because of the US presidential elections and the Olympics have pushed up prices of the raw material, analysts said.
The two events see higher ad and news coverage requiring more usage and demand for newsprint, analysts said.
“There has been a demand-supply mismatch for newsprint...these prices will have an effect on this quarter and the pressure will only increase in the following quarters,” said an analyst with a local brokerage, who asked not to be named. A shortage of waste print used in China’s newsprint plants, rising fuel prices and a volatile rupee during the first half of 2008 also affected newsprint prices, analysts said.
Newsprint cost has increased by 45% in the year to the beginning of July to $975 (Rs 41,145) a tonne from $675 a tonne, brokerage Prabhudas Lilladher said in a report.
Deccan Chronicle imports all its newsprint requirements while HT media imports 70% of newsprint requirements, a Motilal Oswal report said.
Deccan Chronicle is expected to post a net profit growth of just 4% to Rs87.2 crore while net sales will grow 43% to Rs248 crore, according to a Reuters poll of brokerages.
Deccan Chronicle has launched a Bangalore edition of its English daily Deccan Chronicle and its financial newspaper Financial Chronicle in Hyderabad, Chennai, Bangalore and Mumbai, resulting in margins getting squeezed by launch expenses, analysts said.
HT Media, which publishes English daily Hindustan Times, is expected to post a 2% rise in net profit at Rs34.9 crore and net sales of Rs318 crore. Net sales are seen to grow 16%, according to the poll. The company also publishes business newspaper Mint and is expanding the presence of its Hindi newspaper Hindustan.
Advertising will lead revenue growth for HT and its operating margins could contract 130 basis points year on year to 19%, Prabhudas Lilladher said. (Hundred basis points make one percentage point.)
The newspaper firms will also face a possible slowdown in revenue growth because of slowing economic growth, said the analyst at the local brokerage. In the September quarter, margins will be squeezed further by newsprint costs, analysts said.