Gannett, Knight-Ridder Expect Profit Gains Despite Newsprint Hikes
NEW YORK (AP) _ Two of the nation’s biggest newspaper companies say they expect profits to rise this year despite whopping increases in newsprint prices.
Gannett Co. Inc. and Knight-Ridder Inc. are counting on continued growth in advertising and circulation revenue to help offset anticipated 40 percent increases in their newsprint costs.
They told securities analysts Tuesday at the second annual Mid-Year Media Review conference that they are also keeping the reins on other operating costs and are trying to conserve newsprint.
Gannett, the Arlington, Va.-based owner of USA Today and 81 other daily newspapers is sponsoring the three-day conference that ends Wednesday.
Newsprint prices have risen repeatedly over the past year as worldwide demand for paper outstrip supply.
Another increase of about 10 percent has been announced by some major suppliers for Sept. 1. Newsprint typically comprise 15 percent to 20 percent of a newspaper company’s costs.
Nicholas Penniman IV, a top newspaper division executive for Pulitzer Publishing Co. said ``there is a possibility″ the September increase will be delayed because some big suppliers have not yet embraced the hike.
But other industry executives expect it would take effect on schedule.
Douglas McCorkindale, vice chairman at Gannett which is the biggest North American buyer of newsprint, said the hikes will add $130 million to $150 million to Gannett’s newspaper division costs this year.
He said he expected an increase of the same magnitude next year and said it could take three to four years for the industry to increase capacity enough to satisfy demand.
``It’s not clear when we will see a break in prices,″ McCorkindale said. He said Gannett expects to cut newsprint usage by 4 percent this year.
John Curley, Gannett chairman and chief executive, said the industry should take a look at the possibility of decreasing the standard newspaper width to 50 inches from the current 54 to 55 inches to conserve newsprint.
Cathleen Black, head of the Newspaper Association of America, told the conference earlier that the trade group planned to survey members on the idea.
Gary Watson, head of Gannett’s newspaper division, said advertising revenue was up 6 percent for the first five months of the year at Gannett’s papers, but that costs other than newsprint were up only 2 percent.
McCorkindale said the company was comfortable with analyst’s estimates that Gannett would earn $3.45 to $3.55 a share this year versus $3.23 in
Miami-based Knight-Ridder also expects to post earnings well above the $3.15 a share it earned a year ago, said president and chief executive P. Anthony Ridder.
Jack Fontaine, executive vice president, said the owner of the Philadelphia Inquirer, Miami Herald and Detroit Free Press and two dozen other newspapers was comfortable with analysts’ estimates of earnings of about $3.50 a share before unusual items for 1995.
Ridder said newsprint costs will be up 40 percent this year and sees no reason to think the September increase won’t stick.
He said the rise in overall operating costs should be in the single digits, however.
Fontaine said newspaper ad revenue was up 8 percent through May this year including 10 percent in Philadelphia, 16 percent in San Jose, 7 percent in Detroit and 3 percent in Miami.
Ridder said newspaper managers have each been asked to come up with new ways to boost revenue by 3 percent or a total of $50 million this year. He said he is encouraged by progress to date.