Companies

Rise in newsprint lowers profitability of print media companies this fiscal: Crisil

V Rishi Kumar Hyderabad | Updated on September 12, 2018 Published on September 12, 2018

Newspapers may need price increase to offset impact, despite ad growth

Operating margins of print media companies could decline by more than 400 basis points this fiscal due to a rise in the cost of newsprint, which accounts for 35-45 per cent of their total cost, says Crisil, the rating agency.

Newspapers may need Rs 1.25 per copy price increase to offset impact, despite growth in ads.

During the first quarter of this fiscal, newsprint prices shot up about 30 per cent, and are hovering 20 per cent above the average prices of fiscal 2018. They are expected to remain elevated over Rs 45,000/tonne through this fiscal.

The impact on profitability is despite an expected bump-up in advertising revenues during the second half of fiscal 2019 because of general elections. Advertising revenues had risen by around 7 per cent during the 2014 general elections.

Sachin Gupta, Senior Director, CRISIL Ratings, said, “The rise in newsprint prices could slash the profitability of print media companies by as much as 800 bps this fiscal. But an expected rise in advertising revenues in the second half should reduce the overall impact to 400 bps.”

Ad revenue growth was muted in fiscals 2017 and 2018. This fiscal, CRISIL expects ad revenues to grow 5-7 per cent.

Revenue from circulation is expected to remain flattish this fiscal despite the cover price hike already effected.

Nitesh Jain, Director, CRISIL Ratings, “The dip in profitability due to higher newsprint prices is imminent since the growth in advertising revenues this fiscal will not completely offset the impact of increased costs. And given the high competitive intensity, newspaper companies may not be able to hike the cover price by the Rs 1.25 per copy required to completely offset the impact.”

Published on September 12, 2018
This article is closed for comments.
Please Email the Editor