(Direct Newsline)—Valassis’ third quarter profits dipped 2.3% compared to the third quarter of last year to $21.3 million, or 42 cents per share, while revenue was up 7.4% to $266.1 million compared to the third quarter of 2004, the free-standing-insert and shared-mail advertising company reported yesterday.
The company also warned that increased pressure on FSI pricing overall and a renegotiated contract with its biggest client, Procter & Gamble, may hurt 2006 earnings.
“As of the first week of October 2005, management began discerning an increase in co-op FSI pricing pressure which, if it continues, will negatively affect 2006 and the present anticipation of a year-on-year price recovery in 2007,” the company said in a filing with the Securities and Exchange Commission.
Also, shortly after P&G closed on its purchase of Gillette on Oct. 1, the packaged goods giant demanded that Valassis renegotiate its contract to get pricing similar to what Gillette was getting from an unnamed competitor. The renegotiation was completed earlier this week, Valassis said.
“Overall, management now anticipates 2006 pricing to be down mid- to high-single digits versus 2005,” the company said.
“Although recent events in the FSI industry have affected our earnings forecast for 2006, they have strengthened our resolve,” said Alan F. Schultz, chairman, president and CEO of Valassis, in a statement. “While we face continued pricing pressure in the co-op FSI environment, we remain committed to our growth strategies to diversify our product portfolio and expand our customer base. We have solid financial footing and positive macro trends to fuel our growth.”
Valassis said it would give 2006 earnings guidance in February, when it issues its fourth-quarter report.
The company’s third quarter ended Sept. 1.
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