Torstar posts higher profit, warns about economy (Reuters)

TORONTO (Reuters) - Book and newspaper publisher Torstar Corp reported a higher fourth-quarter profit on Wednesday, but warned it is already seeing signs that problems besetting the economy could be hurting its revenues.

Torstar, which publishes the Harlequin line of romantic fiction and the Toronto Star, Canadas biggest daily newspaper, said it earned C47.2 million (48 million), or 60 Canadian cents a share, in the three months ended December 31. That was up from a profit of C36.1 million, or 46 Canadian cents per share, in the same period a year earlier.

However, revenue fell to C402.9 million from C414.6 million a year earlier, with Torstars book-publishing business responsible for the decline. The result was also short of analyst expectations of C412.3 million, according to Reuters Estimates.

"Uncertainty in the economic outlook for both Canada and the U.S. may affect Torstars businesses in 2008," it said in a statement. "Early indications ... are that the economy may be having a negative impact on newspaper revenues."

It said it announced a "substantial voluntary separation program" this month, which will reduce the newspapers workforce by an unspecified number of employees to help the Star deal with possible revenue declines.

"This program, along with other initiatives, should provide for operating cost relief," it said.

Torstar also said the economy could hurt Harlequins U.S. sales "if discretionary consumer spending falls."

Aside from economic exposure the company has through its newspapers in the province of Ontario, it also saw favorable cost trends in 2007 that are not likely to continue this year, Chief Executive Robert Prichard told analysts in a conference call.

As well, Torstars U.S. sales remain vulnerable to further strengthening in the Canadian dollar.

"These forces will make 2008 tougher for us than 2007," Prichard said. "We still aim to grow, but at a more modest rate than in 2007."

Torstars newspaper and digital revenue inched higher to C296.3 million, from C294.6 million a year earlier. Book publishing revenue fell to C106.6 million from C120 million a year ago.

The company released its results after markets closed. During the day, its shares fell 21 Canadian cents to finish at C17.11.

(1=0.98 Canadian)

(Editing by Rob Wilson)