Bertelsmann Net Profit Tumbles 25% in ’02

German media conglomerate Bertelsmann said net profit plummeted 25% last year after a charge arising from its purchase of the independent Zomba record label.

But earnings, excluding such one-time expenses, rose to $997 million at current exchange rates, up about 63%, as the company’s Random House book division and BMG music unit saw improved results.

Privately held Bertelsmann said net income slid to about $1.03 billion. Gains from the sale of its stake in AOL Europe were offset by a $1.4-billion drop in the value of Zomba, which had seen sales slow after scoring breakthroughs with such acts as Britney Spears and ‘N Sync.

Bertelsmann’s total revenue declined to $19.4 billion, down 3.5% from a year earlier. The company blamed the drop-off on a weaker U.S. dollar, flagging music club sales and a decline in its distribution of independent labels’ recordings.

Bertelsmann was forced to pay about $2.7 billion for Zomba last year after the label’s owner, Clive Calder, exercised a contract option that BMG had agreed to a year earlier. The purchase is by far the most expensive label acquisition in music history.

Excluding Zomba’s net income, BMG earnings of $133 million contrasted with an $84.2-million loss in 2001, owing to a dramatic cost-cutting effort and a series of blockbusters from such acts as Avril Lavigne, Pink and the late Elvis Presley.

Bertelsmann has been retreating from investments in Internet-based businesses launched under former Chief Executive Thomas Middelhoff, who was ousted last year after a showdown with the company’s supervisory board. Middelhoff had clashed with Germany’s Mohn family, which controls 75% of the conglomerate’s shares, over taking the company public.