Torstar Corp., owner of the Toronto Star newspaper and other dailies and weeklies, reported a net profit of $7.4 million in the first quarter as cost cutting helped drive efficiencies at its newspaper and digital operations.

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Torstar CEO David Holland, left, and chairman John Hondrich are shown at Torstar's annual general meeting in Toronto. The bank posted a $7.4-million profit in the quarter. ((Jim Ross/Canadian Press))

The Toronto company reported Wednesday it earned nine cents a share in the first quarter, reversing a loss of $21.4 million or 27 cents a share for the same year-ago period.

The earnings results missed average analyst expectations of 11 cents per share, according to a survey by Thomson Reuters.

The media company said revenue fell to $334.2 million from $339 million for the January to March quarter, but that reflected currency translation impacts that dropped revenue by $10.1 million.

Meanwhile, newspaper and digital operations performed better financially and benefited from cost cutting and job cuts in the last year.

Torstar's net debt fell to $493.2 million from $515.8 million at the end of 2009.

David Holland, Torstar's president and CEO, said he was pleased with the results in the quarter as the company's newspapers and Harlequin romance fiction publisher both improved their finances.

"In the newspapers and digital division the results benefited from a modest increase in revenues but the primary driver of the improved earnings were lower costs," Holland said in a financial report ahead of Torstar's annual meeting in Toronto.

"At Harlequin, continued progress on the digital front contributed to the earnings growth achieved in the quarter. Throughout the business we remain focused on free cash flow generation and reduction of net borrowings."

Cautious outlook

Looking ahead, Holland said, "We remain cautious on the outlook for and the nature of the economic recovery and its impact on the newspapers and digital revenue base."

"At Harlequin, we anticipate business performance will remain solid despite the negative impact the strengthening Canadian dollar will have on operating results."

Earlier this week, Torstar revealed it has submitted an offer to acquire the newspaper and digital businesses of Canwest LP and its related companies as part of the Canwest group's restructuring under bankruptcy protection from creditors.

The company's financing partner is Fairfax Financial Holdings Ltd., which owns about 20 per cent of Torstar.

The banks that own Canwest's newspapers have set a floor price of $950 million for the newspapers, which also have other bidders under the court-supervised auction.

"There can be no assurance that Torstar's offer will be accepted or that a transaction will be consummated," the newspaper company said. "Should Torstar be successful, a purchase of the Canwest assets would be material to Torstar."

Torstar has about 6,600 employees across its entire operations, which include the Star Media Group led by the Toronto Star, Canada's largest daily newspaper and digital properties including Thestar.com, Toronto.com, Workopolis, Olive Media, and eyeReturn Marketing.

The company also owns Metroland Media Group, publishers of community and daily newspapers in Ontario, and Harlequin.