Quarterly report third quarter 2002
Overall position:
Group results have been affected by the economic situation. The declining markets for advertising have caused the greatest impact. Globally, the " business to business" markets for advertising are down between 20 and 40 percent (varying from country to country, and from segment to segment). The market for advertising in Norway fell rather less than in other countries. Globally and in Norway, the greatest decline is found in the situations vacant and IT/telecom fields. For Dagens Næringsliv, the marked drop in advertising revenues since the second quarter of 2001 has been reversed slightly in this quarter compared with the previous quarter. The other Group publications show a moderate growth improvement.
The Group reduced its expenses by 10 % in the third quarter. Cost reductions have been effected in many sectors and include lower development costs, reductions in staff and support fields, reductions on the editorial side and lower distribution and communication expenses.
The operating profit/loss for the third quarter shows some advance when compared with last year. This is the first quarter where there has been improvement in the operating result since the first quarter 2001.
Publication by publication:
Dagens Næringsliv has enjoyed a modest improvement in its operating result and this is because the reduction in expenses has been greater than the decline in income. Further improvement is anticipated. An operating margin of around 10 pro cent so far this year is satisfactory in the present business situation. Dagens Næringsliv continues to win a large number of prizes for its good editorial performance.
TradeWinds has recorded a fall in both turnover and operating result. This is mainly due to the drop in the number of advertisements and the consequences of a declining USD exchange rate. The market position of TradeWinds is strong and preparatory work is in hand to strengthen coverage in China by setting up an own office in Shanghai. TradeWinds is also increasing its coverage of the large container ship market. TradeWinds’ operating margin is 12% and this is expected to remain fairly consistent.
Within the oil and gas sector, Upstream has recorded a weak decline in sales but a sound improvement in the result in the third quarter. The decline in sales has been due to a poor September for advertising and a weakening USD exchange rate. Expenses are down by 15% with reductions in both sales and administration and also in editorial. Further progress is expected in the fourth quarter and circulation is rising somewhat.
DN Nye Mediers improvement in its result is due primarily to expense reductions. These have been made at the same time that there has been good improvement in readership. One is also starting to see growth in advertising on the internet. There will however, be further reductions in expense levels during the coming quarters.
Nautisk Forlag has shown good growth in both turnover and results. Sales growth has come primarily from increased shop sales although traditional chart sales to ships have maintained their established level too.
TDN Nyhetsbyrå shows very stable turnover and results. This indicates that TDN is taking market share in a contracting market.
Losses have been reduced at Europower, largely through expense reductions. A lot is happening in the power generation field and the demand for Europower’s most advanced services is good while there has been a fall in demand for its less sophisticated services. As part of the cost reductions, the office in Stockholm has been wound up and its functions centralised in Oslo.
Progress continues in fisheries and marine aquaculture. There is a solid 30% growth in turnover for Intrafish Media and this sales growth has reduced losses. The Norwegian-language publications are earning money and the newspaper Fiskaren is showing a particularly good trend. The deficit derives from the build-up of the global fishery publications where among other things; Intrafish Newspaper is going from being a quarterly paper to a monthly paper from the beginning of next year. A-Pressen ASA has increased its holding in Intrafish Media to slightly fewer than 20%.
Conclusion:
Moderate improvement in the results is expected in the coming quarter compared with the fourth quarter of 2001. Measures to cut expenses will continue and in some fields, it will be intensified. Considerable uncertainty surrounding trends in the general economic picture remains. Even though the fall in advertising volume appears to be flattening out, further falls may occur. The Group is also sensitive to exchange rate fluctuations in the US dollar and the impact of these will be felt especially in the first and second quarters of 2003.
30 October 2002
The Board of Directors of AS Norges Handels og Sjøfartstidende