Aussie media group downgrades 2009 profit forecast by 28 per cent

Australia's Fairfax Media Ltd, which publishes newspapers such as the Sydney Morning Herald, The Age and the Australian Financial Review forecast a decline in profits for the 2009 financial year driven by weak advertisement revenues.

The Sydney-based company said its earnings are estimated to fall to about A$600 million for the current financial year, about 28 per cent down from its earnings of $831.2 million for 2007-08.

''Assuming no further major deterioration in trading conditions, the company expects to report underlying earnings before depreciation, interest and tax (EBITDA) of circa $600 million,'' said Brian McCarthy, chief executive officer and managing director of Fairfax.

McCarthy told reporters that he didn't expect a return to the 2008 days of $800 million-plus operating profits until at least 2012.

Fairfax chief financial officer Brian Cassell said Fairfax's advertising revenue for the June half was down by about 25 per cent.

Cassell said the recent $650 million capital raising by Fairfax had left it with net debt of about $1.8 billion. Based on its current earnings, as well as reduced interest expense, Fairfax was "well within our covenants" for the financial year, he said.

McCarthy also refused to rule out further redundancies at Fairfax in the wake of a programme of 550 job cuts last year, and revealed a freeze on executive salaries in 2009-10.

''In the weeks since Easter, a clearer picture has emerged in relation to trading conditions in advertising markets in both Australia and New Zealand. It is apparent the markets have continued to deteriorate and although the rate of deterioration has abated, advertising levels are not expected to show any marked improvement at least for the rest of this financial year,'' he added.

 However, McCarthy pointed out that the company's diversification programme had extracted strong performance from regional publishing, broadcasting and digital businesses, offsetting the impact of more significant advertising declines in the metropolitan publishing business.

 Notwithstanding the advertising revenue declines, market shares have improved in key advertising categories, he noted.

''Fairfax Media has undertaken wide ranging cost reduction initiatives. For the second half to date, total costs are approximately 10 per cent lower than for the prior corresponding period,'' he said.

''The new management structure, multi media diversification, cost initiatives and strength of the Company's performance in its markets ideally positions it to take advantage of any upturn in conditions,'' McCarthy added.

McCarthy said the current economic downswing was a major factor in declining advertisement revenue at its flagship newspapers.