The largest media company in the Nordic region SanomaWSOY boosted both its net sales and its operating profit in the first quarter. "We still had to operate in a difficult market in the first quarter. However, we did well, as the comparable operating result improved in all divisions. Cost cutting and streamlining operations took effect and operating profit improved more than net sales," says SanomaWSOY's President & COO Hannu Syrjänen of the first interim results for 2003.
The first quarter of the year has characteristically been the most sluggish for SanomaWSOY due to the seasonal nature of the media business. In spite of that, the Group's net sales in the January - March period of 2003 increased to EUR 564.0 (559.0) million and operating profit grew to EUR 14.8 (14.0) million. Operating profit for the comparison year 2002 included some EUR 16 million gains on sales of assets. SanomaWSOY's financial income declined markedly in the first quarter of 2003 relatively to the previous year, as in 2002 the Group realised some of its share portfolio. For this reason, result before extraordinary items was EUR -0.1 (23.9) million and earnings per share were EUR -0.05 (0.07) in the January - March period 2003.
Seeking a profit was a challenging target in the first quarter of 2003 due to the trend in media advertising. Media advertising grew by 5% in Finland during the first quarter, but without advertising for the parliamentary election, growth would have been less than 2%. The most growth in Finland was for TV advertising, at roughly 6%, and newspaper advertising also grew by 5%. Job advertising continued to decline - this time by 13%. Magazine advertising declined in most of the countries where SanomaWSOY operates, with the exception of Eastern Central Europe.
In spite of the difficult circumstances, SanomaWSOY's units adjusted their operations well. Operations were streamlined and the comparable operating profit improved at Sanoma Magazines, Sanoma, WSOY, SWelcom and Rautakirja. The best improvement in results was at SWelcom, which cut its operating loss from EUR 6.7 million to EUR 1.1 million. SanomaWSOY's President & COO Hannu Syrjänen is confident that the Group will continue to take a brisk trend in the future:
"A media company's success is based on good content and the diverse and efficient distribution of it. You don't get good content by saving, but it's not just a matter of money either but rather of people's expertise. It's a game of skill to improve operations with less input than previously, thus maintaining the Group's ability to hold its own in an economic downswing, and we will be more competitive when the next upswing comes," Syrjänen says.
Syrjänen believes that SanomaWSOY will find ways to achieve good results also later in the year, even if there is no clear turnaround in sight for media advertising: "We will have to adjust further to the sluggish market, which means systematic streamlining. However, we've deployed a lot of effort in many key items, such as the new printing plant at Sanomala and magazine launches, and there are good reasons to suppose that the deployments will gradually begin to yield results. The improvement in the results of television operations has already exceeded our expectations in the first quarter."
SanomaWSOY's financial position improved during the early months of the year and was on a good level. The equity ratio, including capital notes, rose to 46.3%, as against 40.1% a year ago. Interest-bearing liabilities declined to EUR 941.5 (1,360.5) million compared to the previous year. The balance sheet total at the end of March was EUR 2,529.8 (3,004.8) million. According to Hannu Syrjänen the improvement in the financial position will continue, however.
"We will continue to divest our non-core assets. This will strengthen our cash flow and further strengthen our balance sheet, which in turn will affect our financial expenses. Financial expenses have a major impact on our profits below the operating profit line," as Syrjänen sums it up.
SanomaWSOY's net sales are forecast to grow faster than GDP in Finland in 2003. The trend in newspaper, magazine and television advertising is crucial to this growth as they account for approximately a fifth of the Group's net sales. Operating profit will grow faster than net sales, due to operational streamlining and cost cutting.
SanomaWSOY is the leading media group in the Nordic region, with operations in 14 European countries. The Group is comprised of five divisions: Sanoma (publishing and printing newspapers), Sanoma Magazines (publishing magazines and press distribution), SWelcom (electronic media), WSOY (publishing, printing and calendar operations), and Rautakirja (kiosk operations, press distribution, bookstores, movie theatre operations and restaurant operations). In Finland, SanomaWSOY is in the leading position in several fields of the media. The Group took a major step forwards in internationalisation with an acquisition effected in 2001. SanomaWSOY is now Europe's fifth-biggest magazine publisher and it is in the leading position in the Netherlands, Belgium, the Czech Republic and Hungary in addition to Finland. SanomaWSOY's net sales in 2002 were EUR 2.4 billion.
Investor Relations and Group Communications