BEIJING, May 23, 2011 /PRNewswire-Asia-FirstCall/ — China Mass Media Corp. (China Mass Media or the Company) (NYSE: CMM), a leading television advertising company in China, today announced its unaudited financial results for the first quarter ended March 31, 2011.

First Quarter 2011 Highlights:

• Total net revenues were RMB50.9 million (US$7.8 million), a decrease of 9.1% from the first quarter of 2010 and a decrease of 32.8% from the fourth quarter of 2010.
• Operating income was RMB13.1 million (US$2.0 million), a decrease of 5.7% from the first quarter of 2010 and a decrease of 53.7% from the fourth quarter of 2010.
• Net income was RMB8.3 million (US$1.3 million), a decrease of 17.9% from the first quarter of 2010 and a decrease of 56.3% from the fourth quarter of 2010.
• Net cash inflows from operating activities were RMB34.8 million (US$5.3 million), a decrease of 13.7% from net cash inflows from operating activities of RMB40.3 million in the first quarter of 2010 and an increase of 34.2% from the fourth quarter of 2010.

Mr. Shengcheng Wang, Chairman and Chief Executive Officer of China Mass Media, commented, The first quarter of 2011 was a challenging time as we entered the seasonally weak period of the year. In our advertising agency service business, in order to secure long-term commitments from our clients in the face of intense price competition in the advertising market, we initiated a presale promotional campaign last November to attract longer-term contracts by offering sizable discounts. These contracts, which are with both advertising agencies and direct advertisers and range in term from three to six months, will serve as a solid foundation of our revenues in 2011. Due to these promotional activities, there was a significant decrease in the sales price of certain products in the first quarter 2011 compared with the first and fourth quarters of 2010. As a result, revenues from advertising agency services declined despite the increase in our utilization rate. The sequential decline was also primarily because the fourth quarter is traditionally the peak season in our business.

In an effort to diversify our business, towards the end of 2010, we entered into the outdoor advertising business by partnering with the outdoor media company Goto Media. Goto Media operates 80 large LED advertising screens and 1,000 advertising light boxes in 17 high-speed railway stations in China, including Beijing South Station, Shanghai Hongqiao Station, Guangzhou South Station and Tianjin Station. We focus on the sale of advertisements on these LED screens. We believe outdoor LED screens allow advertisements to reach consumers with similar content at a much lower price than traditional television ads. We also believe there are synergies between the outdoor advertising business and television advertising business and many of our existing clients find our services for both appealing. We have formed a dedicated sales team to focus on the sales and marketing of such outdoor services. In the first quarter of 2011, revenues from the sales of outdoor media totaled approximately RMB230,000.

Our production and sponsorship services business continues to show solid growth. During the first quarter of 2011, we produced a number of commercial and print advertisements for clients such as Suning Appliance, Ping An Insurance of China and Yunnan Baiyao.

Our arrangement with CCTV for the Guang Er Gao Zhi program, a 30-second daily public service announcement that is broadcast twice a day on CCTV-1 and CCTV-2, will not be renewed once it expires on June 30, 2011 due to programming changes. This will have a negative impact on our top and bottom line in subsequent periods.

Looking forward, we believe content production will become an important component of our strategy as we attempt to reorient our business towards growth. In 2011, we plan to produce at least one TV entertainment program and one TV drama series. We are also in discussions with a satellite TV network for the production and broadcast of a TV entertainment program in exchange for advertising time slots. We believe that by providing television networks with high quality content, we will be able to gain access to such advertising resources. We will release further details in the coming months.

First Quarter 2011 Financial Results

Revenues

Revenues from advertising agency services were RMB46.7 million (US$7.1 million) in the first quarter of 2011, a decrease of 15.8% from RMB55.5 million in the first quarter of 2010, and a decrease of 32.8% from RMB69.4 million in the fourth quarter of 2010. Given the intense price competition in the advertising market, in order to secure a full-year budget from clients and remain competitive in the market, the Company offered sizable discounts to certain clients. Due to these promotional activities, there was a significant decrease in the Companys average sales price in the first quarter 2011 compared with the first and fourth quarters of 2010. As a result, revenues from advertising agency services declined despite the increase in our the Companys utilization rate. The sequential decline was also primarily because the fourth quarter is the traditional peak season for the Companys business.

Revenues from production and sponsorship services were RMB7.2 million (US$1.1 million) in the first quarter of 2011, an increase of 127.9% from RMB3.1 million in the first quarter of 2010, and a decrease of 37.5% from RMB11.4 million in the fourth quarter of 2010. The Companys efforts to both improve production capabilities and proactively source new clients helped support momentum in the Companys production and sponsorship services business, as compared with the first quarter of 2010. During the first quarter of 2011, the Company successfully produced a number of commercial and print advertisements for clients such as Suning Appliance, Ping An Insurance of China and Yunnan Baiyao. The decrease in revenues from the fourth quarter of 2010 was mainly because of the general higher level of production activity and the payment of two advertisements produced for CCTV in 2008.

Operating costs and expenses

Cost of revenues was RMB27.1 million (US$4.1 million) in the first quarter of 2011, a decrease of 7.7% from RMB29.3 million in the first quarter of 2010 and a decrease of 19.5% from RMB33.7 million in the fourth quarter of 2010. The decrease in cost of revenues compared with the first and fourth quarters of 2010 was mainly because time slots available for sale on CCTV-4 decreased from 90 seconds to 60 seconds during the quarter.

Sales and marketing expenses were RMB4.4 million (US$0.7 million) in the first quarter of 2011, a decrease of 16.0% from RMB5.3 million in the first quarter of 2010 and an increase of 7.6% from RMB4.1 million in the fourth quarter of 2010. The decrease from the first quarter of 2010 was due to lower sales commissions paid to the sales team following the decline in sales performance during the first quarter in 2011. The increase compared with the fourth quarter of 2010 was mainly because management increased the basic salaries of the sales team in order to attract more talented people.

General and administrative expenses were RMB6.2 million (US$1.0 million) in the first quarter of 2011, a decrease of 16.0% from RMB7.4 million in the first quarter of 2010 and a decrease of 35.1% from RMB9.6 million in the fourth quarter of 2010. The decrease was mainly due to lower professional service fees in the first quarter of 2011.

Other expenses included an exchange loss of RMB2.5 million (US$0.4 million) in the first quarter of 2011, which compares with an exchange loss of RMB2.8 million (US$ 0.4 million) in the fourth quarter of 2010 and RMB0.1 million (US$0.01 million) in the first quarter of 2010. The Companys functional currency, the Renminbi, continued to appreciate against the US Dollar (USD), while the Company maintained significant USD deposits.

Income tax expense was RMB4.9 million (US$0.7 million) in the first quarter of 2011, an increase of 4.1% from RMB4.7 million in the first quarter of 2010, and a decrease of 43.5% from RMB8.6 million in the fourth quarter of 2010. The Companys effective tax rate was 31.6%, 31.3% and 37.0% for the three months ended March 31, 2010, December 31, 2010 and March 31, 2011, respectively. The effective tax rate for the first quarter of 2011 was higher than the PRC statutory tax rate mainly due to the exchange losses of RMB2.5 million incurred by the offshore companies that were not deductible from PRC tax.

Operating income, as a result of the foregoing factors, was RMB13.1 million (US$2.0 million) in the first quarter of 2011, a decrease of 5.7% from RMB13.9 million in the first quarter of 2010 and a decrease of 53.7% from RMB28.4 million in the fourth quarter of 2010. The companys operating margin was 24.9%, 37.5% and 25.8% for the three months ended March 31, 2010, December 31, 2010 and March 31, 2011, respectively.

Net income was RMB8.3 million (US$1.3 million) in the first quarter of 2011, a decrease of 17.9% from net income of RMB10.1 million in the first quarter of 2010 and a decrease of 56.3% from RMB19.0 million in net income in the fourth quarter of 2010. The Companys net margin was 18.1%, 25.1% and 16.3% for the three months ended March 31, 2010, December 31, 2010 and March 31, 2011, respectively.

Basic and diluted earnings per ADS for the first quarter of 2011 were RMB0.32 (US$0.05), compared with basic earnings per ADS of RMB0.38 for the first quarter of 2010 and RMB0.72 for the fourth quarter of 2010.

Each ADS represents 30 ordinary shares.

Business Outlook

The Company currently expects to generate total net revenues of between RMB48 million ($7.3 million) to RMB53 million ($8.1 million) for the second quarter of 2011, which represents a potential decrease of 7.0% to 15.8% compared with the second quarter of 2010 due to continued pricing competition in the market. This forecast reflects the Companys current and preliminary estimate, which is subject to change.

Conference Call

China Mass Media will host a conference call and live webcast at 8:00 am Eastern Time (EDT) on Monday, May 23, 2011(8:00 pm Beijing time on May 23, 2011).

The dial-in details for the live conference call are as follows:

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Excerpts from Your World at 10 on CNBC-TV18 Watch the full show »

Media reports say that beleaguered IMF chief Dominique Strauss-Kahn?s defense will assert that his alleged sexual encounter with a hotel made was consensual. This is according to the New York Post. The Post quotes an anonymous source as saying that and I quote, ?There may well have been consent following statements from Strauss-Kahn?s lawyer during this arraignment in a New York court yesterday. He was denied bail. Previous media reports had suggested that his defense would hinge on an alibi from his daughter. The next hearing is now on May 20.

Martin Wolf, Chief Economics Commentator at the Financial Times in an interview with CNBC-TV18?s Menaka Doshi spoke about how Kahn?s absence from the IMF at this crucial time of rescue packages raises several important questions.

Below is a verbatim transcript of his interview. For complete details watch the accompanying videos.

Q: Everyone has been debating for the last two days that Strauss-Kahn was the guy who was building the consensus, pushing the rescues at the IMF. Will that entire process be impacted and I know I say this even though a Portugal bailout was passed by the EU finance minister?s meeting last night where there was an IMF representative present?

A: Yes, the answer is that the bailouts have already been agreed. That was true for the one for Portugal which will go ahead. They are in fact basically completed. The question arises with the next round of bailouts. It is generally understood that there is going to have to be another package for Greece and that will be a politically very controversial package because there are many people in Europe who feel that they have been cheated.

In the sense that originally it was expected that Greece could go back to the markets in 2012 that now looks inconceivable. It is going to need more money. There are also lots of evidences that Greece is not sticking to its programme. This is all going to be very contentious and difficult. For that sort of negotiation and subsequent negotiations of that kind, the absence of Strauss-Kahn could be quite significant.

Q: How will this resolve itself at least in the short-term? For instance, what if Spain needs rescuing a lot sooner than any of us anticipated over the course of the next few months while he is still absent?

A: The assumption at the moment is that Spain will not need a bailout package. That would create enormous problems because of the scale of the country. Its not quite clear that they have the resources necessary. Thats a controversial question to deal with Spain. If that were to happen, it would blow everything apart and they would really have to start rethinking in a very big way. So lets hope that doesnt happen.

But even just dealing with Greece will be a significant issue. Its going to require probably quite a bit more money. It may not be too difficult to do this but certainly it will be more difficult to reach an agreement without the catalytic role of the IMF under Strauss-Kahn and nobody else at the IMF can play that role, they dont have the same political weight within Europe.

Q: Then the good news is that more EU leaders including Angela Merkel are opposed to a debt restructuring for Greece. So even if like you say the catalytic effect of Strauss-Kahn is missed in the next few months, it at least wont come down to a debt restructuring, right?

A: Yes, but the alternative to a debt restructuring is to put a lot of public money up and allow the private sector essentially to withdraw its funding. Thats going to be also difficult and politically very controversial.

Q: Will the events of the last two days force an early departure for Strauss-Kahn who?s term otherwise comes to an end in 2012 and thus will it open the door for possibly a power shift at the IMF with the next leader coming from say a BRIC country versus the tradition of a European leader heading the front?

A: It was widely expected that Strauss-Kahn would leave in any case because he was expected to stand for the presidency of France. In that sense this is sooner and tragically different circumstances but he was not expected to stay for the full term in any case. This is not a forecast about when he might leave. I have no sense of how this criminal procedure will go.

On the question of whether the next head of the IMF will be from a non-European country that will be the big change whether BRIC or non-BRIC. This is obviously the matter that has been discussed. There was an expectation that this was quite likely to happen this time. My own guess, at this stage I haven?t heard from anybody is that given how central the IMF has come to be in Europe and given the enormous shareholding of the Europeans in the IMF they are going to resist very strongly of having somebody in charge of the IMF who is not European.

I suspect though I cannot be sure of this that the Americans are quite likely to support them in which case it will continue to be European. But this is all up for grabs for negotiation. My guess at the moment is that the next head of the IMF will in fact be another European but if they don?t come up with a credible candidate and others do come up with more credible candidates then that could prove to be wrong.

Q: Would you say that the chances then are slim that the next leader is Chinese for instance because China has contributed significant resources to the IMF in recent years in exchange for more voting power that will be due to China this year and next. Yesterday, we had a comment from the Chinese government spokesperson saying, ?You also raised the issue of the selection of the Fund?s senior leadership. We believe that this should be based on the principles of fairness, transparency and merit.? What do you make of that?

A: One has to assess not just the general principle of which country it should come from but also who could produce a credible leader. Leading the IMF, particularly, at a time of global crises requires somebody with enormous experience of crises, very substantial economic weight and expertise, a great deal of creditability around the world. The ideal candidate should have these qualities, political weight as well as intellectual weight.

I don?t think this is a very long shortlist. In fact there are very few people who come to mind. I don?t know who the Chinese government might try to promote to this job. It?s not immediately obvious to me which Chinese figure would meet those criteria. It seems to be quite likely that it would be from someone from somewhere else.

Q: What do you make of the impact of the events of the last few weeks on the future of the IMF, an institution that many have seen along with the World Bank as increasingly relevant in the past few years except for last year where the IMF has definitely come into a prime role with regards to the sovereign debt rescue across Europe?

A: This is unbelievably damaging that the head of this institution be involved in such a case. Of course the institution as such isn?t responsible but the members chose the leader. I don?t know what is going to happen with the case but it is very damaging. I would have to say I disagree with your assessment.

Most informed people would think that the IMF has done remarkably well under Strauss-Kahn?s leadership and has dealt with the crises extraordinarily effectively. The criticisms you mentioned relate to previous periods. The IMF has been astonishingly imaginative and effective during the crises and whatever his other faults, Strauss-Kahn has been a remarkably effective leader of this institution which makes what is now happening even more tragic.

Tags: Media Reports