Newspapers credit steady Q3 FY20 bottom line to stable newsprint prices
Industry experts suggest reduction in raw material purchase cost has in all likelihood saved the entire newspaper fraternity about Rs 1,000 crore in overall spends
In these times of an economic lull when most industries are trying to stay strong, newspapers in India have reported not just a stable readership but also a comfortable bottom line in the third quarter of FY20.
Thanks to stabilising newsprint prices, newspapers across languages have been able to cut down on production costs, thereby pushing their net earnings higher.
Some experts suggest that the newspaper industry might have saved about Rs 1,000 crore from the overall spends of the entire fraternity, just by saving on raw material purchase cost.
HT Media, for instance, reported a consolidated total revenue of Rs 636 crore for Q3 FY20, down by 5% compared to same period last year. However, the PBT was at Rs 42 crore compared to Rs 23 crore recorded in the same period last year. The profit margins for Q3 stood at 19% (vis-à-vis 13% same quarter previous year).
At the time of announcing these numbers, Shobhana Bhartia, Chairperson and Editorial Director, HT Media Ltd and Hindustan Media Ventures Ltd, had said, “Despite revenue pressures, profitability has improved on the back of lower newsprint prices and tight control on costs.”
Stability in newsprint prices leading to reduced production cost
From 2017 to the end of 2019, the newspaper industry in India faced a huge hike in the cost of production as the price of newsprint shot through the roof. The prices went up by as much as 60 per cent, leaving those in the business of print media grappling with increased production cost.
“The last financial year, ending March 2019, was very dramatic and volatile in terms of newsprint prices, which started climbing up sharply from January 2018. Right from a spot price of $480 per metric tonne it went up to $800 per metric tonne,” said Mushtaq Ali, Vice President, Finance and Accounts, at D B Corp Ltd.
However, Ali added that whenever global newsprint consumption has reduced on a weak demand basis, it has resulted in dip in newsprint prices after a period of 8 to 9 months. Hence, there was a similar dip towards the end of calendar year 2018 and that fall continued till October-December 2019 quarter, thereby stabilising the prices to $400 per metric tonne.
“During this period, dollar also remained range bound supporting the overall cost to come down. Newspaper publishing houses saw visible gains of newsprint price reduction from April-June 2019 quarter and it continued. Also the central government’s recent budget decision to reduce custom duty on imported newsprint from 10% to 5%, has come as a relief to the print industry. Apart from Newsprint, ink and plate cost, the second largest cost for us, has remained within the range, adding to the relief,” he explained.
The cost rationalization exercise has given D B Corp good mileage during the year and their overall Opex has been less than the last FY which got added relief by way of Corporate Tax rate reduction, Ali added.
The company reported a PAT growth of 14.4% to Rs 25.09 crore (margin of 14.4%). EBIDTA for them registered a growth of 2.6% YOY to Rs 424.9 crore (margin of 24%) as against Rs 414.2 crore (margin of 22%) in 9M FY2019.The operating profit margin expansion was assisted by softened newsprint prices.
Why Q3 enjoyed maximum impact of reduced newsprint prices
In the backdrop of increasing newsprint prices, most media houses in the business of newspapers had stocked inventory, said Naval Seth, VP, Research at Emkay Global. “The impact of the stabilising newsprint prices was felt only in Q3 when raw material was purchased at the new lowered rates. To deal with high cost of newsprints, newspapers also introduced other cost control methods like altering the pagination. With these initiatives, the impact of the price rise was about 20-25 per cent,” he said.
Although the slowdown hit advertisements in Q3, the reduced newsprint price kept the print media afloat. M V Shreyams Kumar, Joint Managing Director, Mathrubhumi Group, said: “Heavy spenders like retail and automobile were very cautious about spends in ads in Q3 which led to falling top line. However, stabilized newsprint prices gave us a healthy financial report with a comfortable bottom line when compared to the numbers two years back. The best impact, however, will be felt in the final quarter of the fiscal.”
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