Newspapers may post 2nd quarterly drop in profit

By Swati Pandey

MUMBAI (Reuters) - India's listed newspaper publishers are likely to report a year-on-year quarterly drop for a second time as higher newsprint costs and falling advertising revenue weigh on margins.

HT Media may post a 38.5 percent drop in net profit to 227 million rupees on net sales of 3.53 billion, while Deccan Chronicle Holdings' net may more-than-halve to 461.3 million, a Reuters poll of brokerages showed.

"We'll see de-growth in most of these firms. Newsprint prices have been high. Slowdown in advertising revenue is also there," Anand Shah, an analyst with Angel Broking said.

Newsprint costs surged because of a global shortage, while a slowing economy meant companies cut advertising budgets -- a double whammy for media firms, who were already battling shrinking margins.

Auto, retail and real estate - key advertisers to newspapers - are the hardest hit as high interest rates in the first half of 2008 curbed consumer spending, hitting demand.

Operating profit margin of media firms may narrow by 4.7 percentage points to 34 percent, Motilal Oswal Securities said in report. Newsprint costs rose 30-35 percent in the quarter while revenue will likely grow around 15 percent, said Shah.

Newspapers, which import most of their newsprint, also suffered after the Indian rupee fell 3.6 percent against the dollar in the quarter, analysts said.

Deccan Chronicle, which imports 100 percent of its newsprint requirement, will see a drop of 33.4 percentage points in EBITDA margin, the Motilal Oswal report said.