Media groups face rising paper prices

Media groups hit by sharp falls in advertising revenues during the recession are now facing further pressure from rising paper prices.

The price of newsprint has been on the rise for several months and manufacturers are currently seeking increases of 25pc or more for contracts in 2011.

Coupled with continuing uncertainty over advertising spend as the government's austerity measures start to kick in, the result is likely to be further pressure on newspaper groups' profits and newspaper cover prices.

In a trading update earlier this month Trinity Mirror, which published a number of regional dailies as well as the national Mirror titles, said advertising spend remained volatile and while it expected profits for this year to remain in line with expectations, the rise in the price of paper could impact on earnings next year.

Group finance director Vijay Vaghela said: 'As a result of newsprint prices and nothing else, we could see pressure on profits.'

Gary Cullum, editor and publisher of newspaper industry publication PJ, and technical advisor to the Newspaper Society, the industry body for the local and regional media, said: 'Newsprint price increases of between 25pc and 30pc are being asked for by all paper producers for 2011, with no guarantees that the price can be held for 12 months.

'Sensitive negotiations are under way that could have far-reaching impacts on the industry.'

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He added: 'Publishers have been hurting through reduced revenues and fast-moving business models and have little left to cut by way of reduced paginations and smaller formats.

'The fact that newsprint manufacturers, and indeed all manufacturers of consumables, have been struggling in recent years, especially with raw material costs and energy prices, is also beyond doubt.

'But with such potential increases in the pipeline adding perhaps �80 to �100 a tonne to current prices, this would place a huge burden on consumers.'