The revving up of automotive advertising has begun to boost Astral Media‘s revenues and drive its profits up by 24% in the second quarter.
After idling their spending because of the recession, General Motors, Ford, Honda and KIA have once again begun to advertise their vehicles.
The result has been improved revenues particularly for Astral Media’s television and outdoor operations.
“We’re getting to the point where I think the entire industry in TV is seeing the rebound and basically because of the car business,” said CEO Ian Greenberg.
The Montreal-based company, which is also Canada’s largest private-sector radio broadcaster, reported net earnings of $33.6 million or 59 cents per share for the period, improving on year-earlier profits of $27.1 million or 48 cents per share.
The second-quarter performance helped drive profits for the first half of the fiscal year up 35% to $89.9 million or $1.59 per share.
A 4% increase in revenue was led by 23% growth in Astral’s outdoor advertising division. Consolidated quarterly revenue rose to $218.3 million from year-ago levels of $209.3 million, Astral said.
After being virtually non-existent last year, GM’s advertising spending is “back in full force, as is Ford,” Greenberg said.
“It’s frankly refreshing to see the kind of increases whether it’s in radio, TV and outdoor going into the third quarter and hopefully that momentum will carry us into Q4.”
Chrysler, which recently changed its advertising agencies (Publicis won the account from BBDO in Canada), is expected to soon join the bandwagon.
Automotive accounts for 10% to 20% of Astral Media’s overall revenues.
A general economic recovery is also expected to improve advertising spending. Astral said TV revenues should increase by high single digits in the coming quarter, while radio, which has faced challenges, should rise by mid single digits.
“I think it speaks well to the radio industry and our radio business that we’re finally back to increases year over year for the first time in the last four quarters,” Greenberg added.
Drew McReynolds of RBC Capital Markets said radio results were the disappointment in Astral’s second-quarter results.
Revenue fell by 2% from a year ago, worse than the 1% decline three months earlier.
“Although this trend comes as a surprise to us, we believe a recovery in radio advertising in the second half of 2010 is the bigger delta point on which to focus,” he wrote in a report.
Astral’s radio operating earnings decreased 14% due to lower revenues and “strategic investments” on programming, brand and sales activity. This included higher programming costs related to Les Grades Gueules and the boom 97.3 reformat.
The company also booked a 6% increase in television revenue, with advertising sales derived from air time rising 11% during the quarter.
