Parks push up Disney profits

NEW YORK - Profits at Walt Disney have jumped thanks to an unexpected rise in theme-park revenue. Disney has also agreed to sell a stake in its ABC radio business.

First-quarter profits at America's second-biggest media company rose to US$734 million ($1 billion), or 37 cents a share, from US$686 million, or 33 cents, a year earlier.

Sales rose 2.2 per cent to US$8.85 billion. Profit at the parks unit surged 51 per cent to US$375 million as people visited the US theme parks for 50th anniversary celebrations and ticket prices rose.

More advertising bolstered results at the ABC television network. But profit fell at the company's film unit, which Disney chief executive Robert Iger is trying to revive with the US$7.4 billion purchase of the Pixar computer animated movie studio.

"They've really hit their sweet spot at the parks," said Vic Hawley, a money manager at Los Angeles-based Reed Conner & Birdwell, which owns more than 3 million Disney shares.

"Getting the anniversary going has been driving this. A little uptick in attendance gives them a lot more earnings."

Disney agreed to merge its ABC radio network and 22 stations with Citadel Broadcasting in a transaction valued at about US$2.7 billion. The deal reduces Disney's stake in a slower-growing unit as advertisers and listeners flock to satellite-radio services.

Disney chief financial officer Thomas Staggs reiterated the company's forecast for double-digit percentage earnings increases through 2008.

Promotions for the 50th anniversary of Disneyland in Anaheim, California, helped boost parks revenue 13 per cent to US$2.4 billion, the company said.

Profit at the resorts business exceeded the US$288.4 million average estimate of five analysts surveyed by Bloomberg News.

"Attendance was up, restaurant and hotel lodgings were up. Theme park attendance was up," Michael Cuggino, president at Pacific Heights Asset Management in San Francisco, said. The company set a holiday-season attendance record at its US theme parks, Iger said. Higher sales of consumer goods at the parks and more expensive room rates helped bolster profit at the unit.

Profit at Disney's film unit plummeted 60 per cent to US$128 million as theatre releases and home-videos failed to match last year's offerings. Revenue fell 13 per cent to US$2.05 billion.

"The number of units sold was clearly down," Staggs said. "Our quarter suffered a bit because of the slate we had," he said on the conference call.

Disney's The Chronicles of Narnia: The Lion, the Witch and the Wardrobe, which opened December 9 and took in US$209 million in the quarter, was the company's top film last quarter. That gross and the US$131.7 million from Chicken Little didn't measure up to last quarter's hits including The Incredibles, National Treasure and Ladder 49.

Pixar Emeryville, California-based Pixar's The Incredibles went on to become the top-selling DVD last year with US$285 million in sales after its March 2005 release, according to DVD Exclusive magazine.

Disney's home video sales in the quarter fell 25 per cent to about 65 million units, Lehman Brothers analyst Vijay Jayant said.

Iger said Disney would release about two Pixar films each year, an increase over Pixar's earlier goal of about one per year. Pixar will take over production of Toy Story 3, a sequel that Disney's in-house animators had been working on, Iger said.

Profit at Disney's broadcasting business rose 87 per cent to US$234 million as ABC shows such as Lost and Desperate Housewives drew more viewers, letting the company raise ad prices. Profit at Disney's cable networks fell as the company deferred ESPN revenue.

- BLOOMBERG