Higher newsprint cost eats into print media revenues
Since Russia’s invasion began in late Feb, imported newsprint prices jumped by 80% and could soar further in next 6 mths due to the absence of imports; Ind-Ra predicts 25% top line growth for print media in FY23 as ad revenues rising
image for illustrative purpose
Mixed Bag
• Recovery of circulation volumes, higher advertisement volumes
• It further leads to increase in newsprint consumption
• Imports accounted for 52% of overall newsprint consumption
• Extended period of absence of imports will impact print media
• Newsprint requirement in FY21 halved to about 1.1 mn tonnes from 2.1 mn tonnes in FY20
Mumbai: A jump in advertising could lead to an increase of 25-30 per cent in print media revenues in FY23, but pressure from higher newsprint costs because of Russia's Ukraine invasion will dent profitability, a report said on Tuesday.
The operating profit margins for print media players can narrow by up to three percentage points in FY23, the report by India Ratings and Research (Ind-Ra) said. The agency said about 60 per cent of the newsprint used in FY21 was imported and added that since the invasion began in late February, imported newsprint prices have jumped by up to 80 per cent, and could soar further in the next six months due to the absence of imports. A gradual increase in the supply from domestic sources, in an extended period of absence of imports, should keep the prices under check, it said, adding that in the first ten months of FY22, prior to the war, imports accounted for about 52 per cent of the overall newsprint consumed, which was lowest in a decade.
In FY21, Russia accounted for the highest share of this at 38 per cent, followed by 26 per cent from Canada. During FY21, newsprint requirement nearly halved to about 1.1 million tonnes, following the decline in the circulation volumes and low pagination post the Covid-19 outbreak, the agency said, estimating that the same has increased marginally in FY22.
"While a recovery of circulation volumes and higher advertisement volumes shall lead to an increase in the newsprint consumption during FY23, it is unlikely to revert to the levels of about 2.1 million tonnes (FY20), given the substantial drop in the circulation volumes during FY21 and slower recovery in FY22," it added. However, on the positive side, there are factors which will be helping narrow the impact on profit margins as well, the agency said, pointing to increase in advertisement revenue, stock-up of imported newsprint at a lower cost in the recent past and cost optimisations. It said print media players derive about two-thirds of their overall revenue from advertisement income, while circulation revenue and other operating income account for the balance one-third.
Hence, advertisement revenue is directly linked to economic activities and growth. On the back of overall growth in economic activities and an increase in the ad spends from key sectors, advertisement revenue is estimated to increase 25-30 per cent in FY23, while circulation revenue will grow by up to 12 per cent, it said, adding that this will translate into an overall revenue growth of 20-25 per cent. Revenue growth for English print media players could remain high in FY23, primarily in view of the base effect, given they were substantially impacted during FY21 in relation to Hindi and vernacular print media players, it added. The agency estimated FY22 revenue to have grown around 20 per cent, led by a bounce back in the advertisement revenue of about 25 per cent and circulation revenues having increased by around 10 per cent.
