Quebecor World Announces Q1: Pricing Pressure Harms Margins
Press release from the issuing company
MONTREAL--April 24, 2003-- Quebecor World Inc. today announced that for the first quarter 2003, net income was $25 million or $0.12 per diluted share. This compares with $46 million or $0.28 per diluted share in the same quarter last year. This is in line with the Company's previously released first quarter outlook.
Consolidated revenues for the quarter increased $72 million or 5 per cent to $1.5 billion. This was primarily the result of currency translation and the acquisition of the European printing assets of Hachette Filipacchi Medias. Operating margin was 5.1 per cent compared to 7.3 per cent in the same quarter last year. This reflects continuing negative price pressures, higher energy prices, the negative impact of Quebecor World's under-performing French operations and lower margins in Scandinavia and Spain.
"These results reflect the challenging market conditions in the print industry as a result of continued over capacity and the global economic weakness," said Jean Neveu, President and CEO of Quebecor World. "We are addressing the critical area of reducing costs at all levels and across our entire platform. We expect the benefits of these measures to improve our operating margins going forward. As we stated earlier in our first quarter outlook, we do not expect these results to be indicative of our performance in subsequent quarters."
In North America revenues increased $27 million to $1.23 billion and operating income was $83 million compared to $108 million in the first quarter of 2002. Most of the revenue increase occurred in the Retail Group with other business units reporting revenues that were flat or slightly below the same period last year. A more competitive pricing environment had a negative impact on operating income and margins. This is compounded by the underperformance of the book group. It is currently experiencing lower margins as publishers reduce the size and length of their press runs.
In Europe revenues for the quarter increased to $258 million from $212 million, mostly as a result of the Hachette acquisition completed last March. Lower prices and margins in certain parts of our European operations had a negative impact on our overall results. Workforce reductions announced at the end of the fourth quarter 2002 are beginning to be implemented across our French platform and we expect this to have a positive impact on margins in subsequent quarters.
In Latin America we experienced a reduction in revenue and operating income. Margins were also affected by pricing pressures and currency translation. The regional economy continues to be weak, especially in Brazil, where we experienced a reduction in directory volume at our Recife facility. Some of our major customers have reduced their volumes as a result of the current economy. To counter this we are extending our customer base and increasing our focus on export markets in the United States and Europe.
In an accompanying press release today, Quebecor World announced a Substantial Issuer Bid to purchase and cancel up to 10,000,000 of its Subordinate Voting Shares.
"In recent weeks Quebecor World's stock price has experienced a substantial decrease to the point where we believe it is significantly undervalued," said Jean Neveu, President and CEO Quebecor World. "With no major mandatory debt repayment until 2006 we believe this share repurchase is an appropriate use of our cash flow and will enhance shareholder value."
The Board of Directors declared a dividend of $0.13 per share on Multiple Voting Shares and Subordinate Voting Shares. The Board also declared a dividend of CDN$0.3845 per share on Series 3 Preferred Shares, CDN$0.4219 per share on Series 4 Preferred Shares and CDN$0.43125 on Series 5 Preferred Shares. The dividends are payable on June 2, 2003 to shareholders of record at the close of business May 16, 2003.
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