However, newsprint costs are expected to rise by 23% in 2003. As a result, Merrill Lynch is modelling for an average 10-12% decline in 2002 and a 5% increase in 2003 for newspaper groups. If the forecasts are accurate, it should translate into a 4% increase in operating profit for the newspaper industry this year and a flat performance in 2003.
Sensitivity to newsprint prices The broker has a ‘muted’ forecast for newspaper advertising revenue recovery in 2003, at 4%. However, newspaper groups’ sensitivity to newsprint costs could result in either a dampening of a advertising recovery or a upside to a continued poor advertising market. Equally, lower prices coupled with an improving ad market would be a boon to newspaper publishing groups.
Carry-over to the UK Newsprint costs trends that emerge in the US may well then filter through to the UK and the rest of Europe and so the experience of US press companies in the coming months may be a taster for publishers here and on the continent.
