Fairfax Media has forecast a 27% drop in full year profit and instigated an executive salary freeze amid its concerns that the advertising downturn shows no sign of recovery.
However, the newspaper publisher said a resilient performance from its divisions and cost cutting had cushioned the effect of a decline in advertising revenue.
Fairfax, which merged with Rural Press in 2007, said it expected to report underlying earnings before depreciation, interest and tax (EBITDA) of about $600 million for its full fiscal year.
This compares with $818.3 million in the previous corresponding period to June 30.
"In the weeks since Easter, a clearer picture has emerged in relation to trading conditions in advertising markets in both Australia and New Zealand,'' chief executive Brian McCarthy said in a statement this afternoon.
"It is apparent the markets have continued to deteriorate and, although the rate of deterioration has abated, advertising levels are not expected to show any marked improvement at least for the rest of this financial year.''
Mr McCarthy said management remained focused on achieving further cost cutting, and executive salaries would be frozen.
"For the second half to date, total costs are approximately 10% lower than for the prior corresponding period,'' he said.
"Consistent with these reductions, the CEO, directors and generally direct reports to the CEO, have accepted fee and salary freezes,'' he said.
Fairfax initiated a cost-cutting program in August 2008, resulting in 550 job losses across Australia and New Zealand.
The axing of staff was criticised after it was revealed that former chief executive David Kirk received a $3.41 million 2007/08 salary package, up 24% on the previous year.
Fairfax said an increase in circulation and its diversification program helped offset falls in advertising revenue.
"Demonstrating the benefits of the company's diversification program, a more resilient performance from regional publishing, broadcasting and digital businesses has reduced the impact of more significant advertising declines in the metropolitan publishing business,'' Mr McCarthy said.
"Notwithstanding the advertising revenue declines, market shares have improved in key advertising categories.
"Also, circulation revenues have improved over the prior corresponding periods.''
In 2008, Fairfax booked a 47% increase in net profit to $386.9 million, up from $263.51 million in the prior corresponding period.
The merged group has 240 regional, rural and community publications, an agricultural publishing business in the US and a significant presence in New Zealand.
The company also owns nine radio licenses in Queensland and South Australia and metro newspapers in Sydney, Melbourne and Canberra.
Fairfax shares closed down 1 cent at $1.12, after falling under $1 for the first time in February.