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EMI’s off-key perf

Profit warning knocks stock to record drop

LONDON — Shares of British music major EMI took a nose-dive in U.K. and U.S. markets Tuesday after the company issued a surprise warning forecasting a 20% drop in pre-tax profits for the year.

Announcement knocked 35% off the record conglom’s share price in London trading Tuesday — EMI’s biggest one-day fall ever. In the U.S., EMI’s American Depositary Receipts slipped 29% to settle at $6.75.

EMI, third-biggest of the five music majors in worldwide market share, cited a “marked deterioration” in the U.S. and Latin American markets — especially in September. A few months earlier, the company had said results were tracking roughly in line with last year’s numbers.

The major has also had a run of bad fortune in recent weeks, including the nervous breakdown of newly signed Virgin Records singer Mariah Carey and the tragic death in a plane crash of talented young R&B chanteuse Aaliyah.

“When you take a look at the world markets, they’ve all been down for the past couple of months — it was just a matter of time,” said Michael Nathanson, a veteran analyst at Sanford Bernstein, noting that his firm had put out research Friday warning of the downturn at EMI. “This didn’t surprise us at all.”

EMI said Wednesday it was setting aside £100 million ($146 million) for restructuring. Company plans to make further job cuts in Latin America — 100 staff have already been axed — and expects to save $95 million annually through the combination of its North American and European back offices.

Sources close to the situation said cuts may also come at hip-hop and urban label Priority Records, which EMI had reportedly planned to fold into its flagship Capitol Records imprint.

EMI said it expected its recorded music division to post a small operating loss for the first half of the year. Music publishing income, however, would be roughly flat at $74.5 million.

“Although the first quarter of our financial year was steady, the second quarter saw a fall in sales, and September is proving to be particularly difficult,” the company said.

Distribbing exit planned

EMI is also looking to exit its low-margin music manufacturing and distribution businesses. Company said it was in discussions with a number of interested parties and would announce plans for those operations by year end.

EMI chairman Eric Nicoli said: “We expect a much improved performance from recorded music in the second half, together with another good contribution from music publishing.”

Company hopes to draw strength from a promising slate of upcoming releases, including albums from Robbie Williams, Garth Brooks and Pink Floyd. Also on deck is the latest effort from Lenny Kravitz, whose greatest hits disc has been one of EMI’s best sellers of the past year, moving more than 8 million copies worldwide to date.

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