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Azteca belt-tightening shows

B'caster cut prod'n, p'gramming, transmission expenses

MEXICO CITY — Despite a notable dip in sales, TV Azteca reported a nearly twelvefold increase in earnings for the second quarter, thanks to cost cuts and favorable exchange rates.

Mexico’s second-largest broadcaster reported net income of 550 million pesos ($52.5 million), up from $4.5 million a year earlier quarter.

Azteca attributed the huge earnings rise to operational cost-cutting. The broadcaster reduced production, programming and transmission expenses a healthy 12%, to $65 million from $77 million. Administrative and sales costs remained nearly unchanged for the period at $23 million.

The company attributed the lower year-to-year overhead figures to the high price of broadcasting last year’s soccer World Cup, as compared to relatively lower costs for this year’s Mexican national elections, on July 6.

It was the same elections, however, that led to Azteca’s topline downtick. Sales of election advertising reached only $10 million, compared to the $25 million that the broadcaster hauled in during last year’s soccer World Cup. Total Azteca sales for the period fell 4%, to $171 million from $181 million.

Revenues from political advertising were disappointing when compared to rival Grupo Televisa, which sold $35 million in campaign spots during the same period. Analyst Bear Stearns called the political advertising disparity “curious.”

The falloff was buffered, however, by a $7.6 million gain, thanks to a Mexican peso that rose 3% for the period. Large peso declines during the same period last year led to a loss of $34 million.

On further financial fronts, Azteca said it made a $125 million distribution to shareholders in June, with an eye on reducing debts. Looking forward, Azteca says it hopes to generate $125 million in free cash by the end of the year.

Shares of TV Azteca, which reported earnings late Monday, fell 3.4% on the news on Monday. In NYSE trading Wednesday, shares in Azteca fell 2 cents, to $6.50 per share.

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