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Zomba socks German media giant
BERLIN, Germany (Reuters) -- German media giant Bertelsmann AG on Tuesday posted a sharp rise in 2002 core earnings to 936 million euros ($1 billion) as cost cutting offset a seven percent drop in sales in a worldwide media slump. The privately-held number five global media group kept net profit broadly stable at 928 million euros, funding 2.4 billion euros in writedowns with a windfall from the sale of its stake in AOL Europe to AOL Time Warner. Chief Executive Gunter Thielen, who came in last year after his high-flying predecessor Thomas Middelhoff fell out with the family owners, said the group aimed to again defy the weak economy and the media slump in 2003. "For 2003, we expect stable sales and further growth in operating earnings despite the unchanged difficult economic environment,'' Thielen said. Bertelsmann bought assets for more than five billion euros last year, including another 22 percent stake in its television division RTL Group and the record label Zomba. But in an admission of how much it overpaid for Zomba, the group wrote down 1.3 billion euros of the $2.74 billion it paid for the label. "The amount we invested was unique and will not be repeated quickly,'' Chief Financial Officer Siegfried Luther told reporters in Berlin. He said that as Bertelsmann aimed to strengthen its music unit BMG, the smallest of the top five music labels, he would rule out a major buy in that market. "I don't believe that our plans for BMG would include spending a major cash amount,'' Luther said. Debt risesBertelsmann's net debt rose to 2.7 billion euros from 859 million euros a year ago on the Zomba buy, but Luther said the group aimed to lower its debt this year. "We want to come below two billion euros,'' he said. To help cut its debt, the group has put its science publishing unit BertelsmannSpringer on the block, a disposal which could raise about one billion euros. The sale, for which eight investors are still in the race, is expected to be signed by the end of April, BertelsmannSpringer's head Arnold Bahlmann said. Bertelsmann currently has no plans to issue a one billion euro benchmark bond it delayed when markets worsened after bankruptcies and accounting scandals in the U.S. last year, Luther said. "If and when the market improves, we will look at that again,'' Luther said. But the group is set to issue a $500 million bond in a private placement in the coming weeks, he said. The bond will be lead managed by the Royal Bank of Scotland, he said. Bertelsmann has changed its accounting rules to the International Accounting Standard (IAS) and switched its financial year to match the calendar year from 2002. Pro-forma comparative numbers for 2001 were provided by the company. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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