Quebecor cutting 500 jobs at Sun Media, impacted by weak advertising market

MONTREAL – Quebecor Inc. is cutting about 500 jobs at its Sun Media newspaper division in a move that includes closing two production facilities in Ontario as it copes with lower advertising revenue.

The cuts represent some 10 per cent of Sun Media’s workforce and are part of an effort to reduce annual costs by $45 million.

“Although our circulation revenue has stabilized due to strategic pricing increases, the advertising sector continues to experience declines through the news and media industry,” chief executive Pierre Karl Peladeau said Tuesday.

“Newspapers across the world have been impacted in the last 10 years by the introduction of new technologies, changing dramatically the incumbents of printing products,” Peladeau noted.

The Journal de Montreal and the Journal de Quebec now have paywalls for online readers, he said, adding that the rest of Quebecor’s major publications will add paywalls before the end of this year.

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During the conference call, Peladeau was not specific about the number of employees who will lose their jobs, saying “several hundred employees” will be leaving Quebecor (TSX:QBR.B).

“I would like to mention that I feel very sad for the numerous redundancies we were forced to implement in our newspaper division.”

The Southern Ontario Newsmedia Guild said about 27 journalists’ jobs are slated to be eliminated as the company centralizes copy editing and pagination functions in Toronto. The guild represents some Sun employees.

Up to 100 jobs will be lost when the printing plants in Ottawa and Kingston close, the guild added.

A news release from Quebecor put the total number of jobs losses at about 500 with production plants to be shuttered as being in Ottawa and Kingston.

“In addition, we will further optimize and consolidate all our industrial operations from pre-press to printing, transportation and distribution into fewer centres of excellence,” Peladeau told financial analysts.

The company’s website says it has “ultra modern” printing facilities in Mirabel, Que., and suburban Toronto, which serve local, regional and national markets.

Quebecor will also “dispose or shut down all non-core activities” to reduce costs, Peladeau said.

There also had been earlier reports Quebecor would eliminate the position of publisher at some newspapers. Peladeau, again, did not provide details.

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“We eliminated several layers of management to streamline our processes, reduce our costs and bring decision-making closer to the local markets.”

Peladeau said Quebecor will use its media platform, including cross promotional activities with Sun News TV and French-language TVA Group, to “bundle our news media products into an integrated multimedia advertising solutions for our clients.”

Quebecor said it remains committed to its publications, which include the Toronto Sun and other dailies across Canada under the Sun and other banners.

A representative for Sun Media declined to provide any additional details.

Quebecor’s news media division employed 5,680 people as of Dec. 31, 2011, of which 1,700 were unionized, according to company filings.

“Clearly, this is a blow to journalism in Canada,” said Paul Morse, head of the Southern Ontario Newsmedia Guild, which represents some of Sun Media’s employees.

“The erosion of these kinds of jobs is a significant problem for newspapers that are going to be dealing with trying to put out quality journalism with workforces that are clearly stretched beyond the limit,” Morse said.

“This is a terrible day for journalism in Canada.”

Sun Media has 36 paid-circulation daily newspapers and six free daily newspapers.

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The Canadian arm of the Communications Workers of America called on Quebecor to stop its “slash-and-burn” strategy and focus on quality local jobs and journalism to boost profits.

“If we’ve learned anything over the last few years, it’s that cutting jobs only hurts quality and that does nothing to attract readers or generate revenue,” said CWA Canada director Martin O’Hanlon.

“Quebecor should be investing in quality local jobs and journalism to win back disenchanted readers,” O’Hanlon said in a statement.

The CWA represents workers at several Sun Media newspapers, including the Kingston Whig-Standard.

O’Hanlon suggested that Quebecor borrow a page from legendary investor Warren Buffett who is busy buying newspapers in the United States and committing to quality local journalism.

Quebecor also has almost 200 community newspapers, shopping guides and other specialty publications. In addition, it provides commercial printing and related services as well as distribution for newspapers, flyers and magazines.

The Montreal-based media and telecom company also owns the Videotron cable and phone business and the TVA television network in Quebec.

In its third-quarter financial results, Quebecor’s net income dropped about 29 per cent to $18.6 million or 30 cents per share.

That’s down from $26.1 million or 41 cents a year ago.

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On the other hand, Quebecor’s adjusted income from continuing operations rose to $52.1 million or 83 cents per share – nine cents a share above the consensus estimated compiled by Thomson Reuters.

The adjusted income was up from $40 million or 63 cents per share in the third quarter of 2011.

Quebecor’s third-quarter revenue also improved, rising about $45 million to nearly $1.06 billion – up from $1.01 billion a year earlier.

“The corporation continued its growth in the third quarter of 2012 despite a fiercely competitive business environment in most of its lines of business,” Peladeau said.

Revenue increased the telecommunications division, which includes its cable, Internet and wireless operations, up eight per cent to $659 million.

In the company’s TV broadcasting operation, revenues increased 11 per cent to $99 million, the company said.

But revenue from the news media division, hit by job cuts, went down by three per cent year-over-year to $228 million.

RBC Capital Markets analyst Drew McReynolds said the results were in line with expectations.

He said Quebecor had basic cable TV net subscriber additions of 15,000 versus his minus 3,000 estimate for the quarter.

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The company had net Internet subscribers of 29,000 compared with McReynolds’ estimate of 26,000, and wireless net additions of 31,000 customers compared with his estimate of 20,000.

Shares in Quebecor were up 49 cents at $35.74 in afternoon trading on the Toronto Stock Exchange.

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