Transcontinental slashes 10% of workforce

A clampdown on ad spending further jolted the media industry Wednesday, as Montreal-based publisher and printer Transcontinental Inc. slashed 10% of its North American workforce.

The company said clients have cancelled printing and direct-mail projects, as well as planned advertising in magazines, in a bid to cut costs during the recession.

Popular titles in the Transcontinental library include Canadian Living and The Hockey News. The company also prints books, flyers and newspapers for various clients.

"In recent weeks the rapid deterioration of the economy has reduced the communication and marketing investments of a number of Transcontinental's customers, significantly affecting some of the [its] business niches," read a statement from the company.

The company said the 1,500 layoffs and other cost-cutting measures will save $75-million annually, including $50-million this year.

Half the cuts will occur at the company's U.S. operations, including 500 employees at the company's direct-mail business, and 10% at printing plants in Mexico. The remaining 40% are in Canada, with half of those in Quebec.

The company's Canadian media business, which publishes magazines and community newspapers, will eliminate 100 positions, with pink slips for Toronto-area workers starting yesterday morning.

Transcontinental divides along three business lines - commercial printing, marketing products and media. Each segment accounted equally to the company's bottom line in the last quarter.

Magazine publishers are suffering from a loss of advertising revenue, with the number of advertising pages in Canadian magazines sliding 16% in the fourth quarter, according to Leading National Advertisers Canada. That mirrors a steep decline in advertising revenue for U.S magazines.

One Bay Street analyst said Wednesday that the payroll cuts show the dire situation facing Canadian media companies.

The degree of "restructuring provides further evidence of the major headwinds facing all media companies, and particularly the publishers and printers," Drew McReynolds, RBC Capital Markets media analyst, wrote in a note to clients.

He singled out Torstar Corp., publisher of the Toronto Star, warning investors to maintain a "cautious view" on the company.

A memo from Transcontinental Media president Natalie Larivière said senior management would take two weeks of unpaid vacation this year, but continue to work during that period.

Other cost-cutting measures at Transcontinental include a hiring freeze, forced unpaid leave and shortened work weeks. The company will cease printing of Canadian Home & Country magazine, although it will continue to publish on the Internet.

Transcontinental shares fell 4% Wednesday on the Toronto Stock Exchange to $8.60.

Transcontinental spokesperson Nessa Prendergast said the layoffs will be carried out over the remainder of this year.

"For the rest of fiscal 2009 we don't expect there will be more than the 1,500 we announced today," she said.

Ms. Larivière ended her memo by warning of tough times still to come.

"The economical prognosis is not getting better, and we need to be fully prepared for a difficult year ahead of us."