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Quebecor swings to loss on weak market conditions

Quebecor has posted a loss of $167.8-million or $1.36 per share, compared with a profit of $17.1-million or 14 cents in the year-earlier period.

christinne muschi The Globe and Mail

Quebecor Inc. swung to a loss in the third quarter as it continued to struggle with the fallout from weak market conditions and the transition to digital in the newspaper, music and book industries.

The Montreal-based media and telecom giant posted a loss of $167.8-million or $1.36 per share, compared with a profit of $17.1-million or 14 cents in the year-earlier period.

The loss included a $177-million non-cash impact of fluctuations in the value of goodwill, intangible assets and derivative financial instruments.

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On an adjusted basis, Quebecor booked a profit of $63.7-million or 51 cents per share, up 28.7 per cent from $49.5-million or 39 cents.

Adjusted EPS of 51 cents beat analysts' consensus estimate of 40 cents.

Revenues rose 1.9 per cent to $1.08-billion in the third quarter.

Total third-quarter operating income was $380.3-million, up from $349.3-million and above analysts' estimate of $361-million.

During the third quarter, Quebecor recorded a non-cash charge of $305.8-million in its news media and leisure and entertainment divisions for impairment of goodwill and intangible assets.

Quebecor announced plans in July to cut hundreds of jobs and shut down several publications in its newspaper unit – the largest chain in Canada – as a result of falling print advertising revenue.

In the third quarter, revenue at News Media fell 8.7 per cent to $208-million while operating income was up 14.7 per cent to $25.8-million. The broadcasting unit more than doubled its operating income to $15.2-million.

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"The increases reflect, among other things, the impact of significant cost-containment and repositioning initiatives implemented in recent years," the company said on Thursday.

In the Vidéotron subsidiary, telecom revenue rose 5.1 per cent to $683-million and operating income in that unit increased 8.2 per cent to $329-million.

Wireless additions were 26,900 subscribers, while average monthly revenue per user (ARPU) in that segment was $41.55, up 0.5 per cent.

Cable television ARPU was $49.30, up 1.5 per cent.

"Over all, the quarterly results were positive and in line despite a highly competitive environment. The newspaper business continues to be impacted by secular downward pressures, but makes up a smaller portion of overall results, and restructuring initiatives are paying off," Desjardins Securities analyst Maher Yaghi said in a research note Thursday.

In wireless, the "lower ARPU compared with the incumbents is a result of Vidéotron's lack of higher data ARPU from smartphone customers; however, the company is striking a balance between customer growth and price discounting," he said.

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"Revenue declines [at News Media] continue as structural changes in the broader media industry take their toll on financial results, although aggregate restructuring in the quarter supported the EBITDA line," said Mr. Yaghi.

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About the Author
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

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