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Cinram's 1Q 2011 disc revenues plunge 44% with loss of WHV contract

Cinram’s 1Q 2011 results just out show a sharp fall in consolidated revenue to $176.7 million down from $298.6 million in the first quarter of 2010. First quarter pre-recorded multimedia revenue – which includes replication and distribution of Blu-ray discs, DVDs and CDs – was down 44% to $149.8 million from $269.3 million in 2010, a fall caused by the loss of the Warner Home Video contract in 2010.

The company also attributes the bad results to a general softness in new releases in the first quarter of 2011 compared with the first quarter of 2010, which had hits such as Avatar, Blind Side and Sherlock Holmes.

Revenue from the Video Games segment in the first quarter of 2011 was $11.2 million, down from $17.3 million in 2010, primarily as a result of the loss of two major clients that were sold to other companies during 2010.

Pre-recorded multimedia business results show a $5.4-million loss in 1Q 2011 compared to pre-tax profit of $30.8 million one year ago.

Cinram replicated 120.3 million DVDs in the first quarter of 2011, compared to 242.3 million units in 2010. DVD revenue (which includes replication and distribution services) was $115.8 million, compared to $229.9 million in the prior year.

Blu-ray disc replication revenue was $7.2 million in the first quarter of 2011, compared to $8.9 million in the comparable 2010 period.

CD revenue (including replication and distribution of CDs) was down 12% to $26.8 million from $30.5 million due to lower unit shipments, consistent with industry declines for this format.

North America accounted for 59% of first quarter consolidated revenue, compared with 58% in the prior year period. First quarter European revenue represented 41% of consolidated sales, compared with 42% in the first quarter of 2010.

"The lower revenues and earnings compared to 2010 were not surprising given the departure of Warner Home Video in July 2010 and the industry wide decline in volume in the first quarter,” commented CEO Steve Brown. “The loss of some of our Games customers due to dispositions was disappointing, however, I am pleased that we were able to actually grow our margins in the Video Games group, despite this lower revenue level. "

Bright business prospects include the recent signing of a new multi-year contract with Twentieth Century Fox Home Entertainment to continue to serve as the primary supplier for replication and distribution services for Fox across North America and Europe. Also, Cinram was appointed by Morrisons Supermarkets as sole provider of storage and distribution services for the music, video and games categories in the United Kingdom.

In January, Cinram acquired Los Angeles-based digital media company One K Studios. The move is part of a broad initiative to advance the company further into digital platforms.

Story filed 11.05.11

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