Metro Revenue Soars 28% in 1Q, but U.S. Papers Show Loss

By: Mark Fitzgerald Metro International S.A., the Luxembourg-based publisher of free commuter papers on four continents, Wednesday reported a 28% increase in revenues for the first quarter from the same period in 2004. But the company said its U.S. papers incurred an operating loss of $3.6 million.

U.S. operations showed an operating profit of $7.5 million because of a $15.9 million profit on the sale of 49% of the Metro Boston paper to The New York Times Co.

Worldwide, sales revenues increased to $84.1 million, or 28%, over the first quarter of 2004 revenues of $65.8 million.

At the end of March, worldwide circulation was a combined 6.9 million copies, Metro said. The chain publishes papers in 76 cities.

In the first quarter, Metro launched 11 new editions in five countries, with a combined distribution of 670,000

"These launches follow the starting up in the fourth quarter of last year of new editions in Lisbon and Rotterdam as well as fully national editions in Poland and Sweden," Metro President and CEO Pelle Tornberg said in a statement. "The group has also absorbed during the quarter pre-launch costs of several online service businesses, which will be launched in the second quarter."

Tornberg said Metro had a "financially ... disappointing quarter" in the United States.

"Metro New York?s sales growth has not been as steep as desired and all three operations were hard hit by negative PR (public relations) directed at the business and seemingly partly motivated by an attempt to block the transaction in Boston with The New York Times Company," he said. "The successful completion of the transaction has meant that our three US operations are now operating normally again and the financial performance of the region is strongly expected to improve."

Metro said its U.S. sales increased by 27% year-over-year in the first quarter to $5.6 million, an increase which it said reflected the May 2004 launch of its New York City edition. The Boston edition incurred its first-ever quarterly loss in the first quarter, "owing to a damaging negative public relations campaign waged against the company by a competitor and to a lesser extent by a temporary loss of management focus owing to the Boston?s Globe?s extensive due diligence," Metro said.

All three U.S. operations were "effected by the negative publicity," the company said.

Metro Philadelphia, which reported its first ever quarterly operating profit in the fourth quarter of
2004, was not profitable during the quarter, the company said. "A more offensive circulation strategy has been adopted during the quarter in order to position the operation for greater sales growth in the future," it said.

Metro New York lost $4.8 million in the quarter, the company said.