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EMI Swings to Profit for Year

Firm earns $354 million as it restructures music operations, cashes out investments. Worldwide sales continue to drop.

May 21, 2003|Jeff Leeds | Times Staff Writer

EMI Group said it swung to a profit for its full fiscal year as it restructured global music operations and cashed out some investments.

The British music giant, which releases music from such acts as Lisa Marie Presley and the Rolling Stones, reported net income of $354 million for the year ended March 31, at average exchange rates, compared with a net loss of $307 million for the year-ago period.

The company said its results benefited from a one-time estimated $323-million gain from the sale of its stake in music retailer HMV and music-video network Viva Media.

EMI also engineered a complex debt transaction, resulting in a gain of about $86 million used to pay interest and restructured its balance sheet to extend its average debt maturity to five years.

Without those gains, the company would have reported negative cash flow, according to Wall Street analysts.

The results come as prospects appear to be dimming for EMI to play a major role in the next attempted music industry merger. The firm has held informal talks with rivals AOL Time Warner Inc. and Bertelsmann, but chances for a deal with either appear slim, sources say.

EMI executives Tuesday said the company can compete on its own. The music giant said it earned a profit on music sales in North America for the first time after five consecutive years of losses, though the international picture was mixed. The company said it closed its operation in Venezuela because of the nation's deep economic problems.

EMI said its worldwide sales continue to plunge, with revenue sinking 11% to about $3.3 billion amid surging piracy and other woes. Alain Levy, chief of EMI's recorded-music division, said he expected the global music market to fall an additional 5% to 8% this year.

Sales for the company's recorded-music division, which includes the Capitol and Virgin labels, fell 12.6% to about $2.7 billion. Sales at EMI's giant music-publishing arm remained flat, despite the declining album market.

Levy downplayed the recent merger mania sweeping the music business, saying that he and North American chief David Munns "are so busy rebuilding EMI into a highly profitable company that, frankly, that's not what we're focusing on."

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