Television advertising company China Mass Media Corp. (CMM) reported Monday a plunge in profit for the seasonally slow second quarter that reflected a significant increase in operating costs and expenses, despite a 13.7% increase in revenues. Net income available to shareholders for the second quarter plunged to RMB 371 thousand or US$54 thousand from RMB 8.7 million in the previous year. Earnings per share were RMB 0.001 or US$0.0001, compared to RMB 0.02 per share in the prior year. Earnings per ADS decreased to RMB 0.02 or US$0.002 from RMB 0.63 in the same quarter last year. Each ADS represents 30 ordinary shares of the company.
Total net revenues increased 13.7% to RMB 77.37 million or US$11.33 million from RMB 68.08 million in the earlier year.
Revenues from Advertising agency services decreased to RMB 61.84 million or US$9.05 million from RMB 66.27 million in the preceding year. The company noted that CCTV raised the CCTV-4 airtime charge rate at the beginning of the year citing higher viewer numbers, while China Mass Media's advertising customers were not willing to increase the rate. During the quarter, the Beijing, China-based company posted revenues from Special events services of RMB 14.6 million or US$2.14 million. According to the company, Special events services revenues were fees receivable from CCTV for advertising and marketing services provided in connection with the 2008 Beijing Olympic Games. There were no revenues from special events services in the previous year. Advertisement production and sponsorship services revenues dropped to RMB 2.88 million or US$421 thousand from RMB 4.28 million in the comparable period a year ago, mainly due to a pause in public service announcement sponsorships from several customers because of ongoing contract renewal negotiations. Operating loss for the quarter was RMB 3.13 million or US$458 thousand, compared to an operating income of RMB 7.79 million in the prior-year quarter. Total operating costs and expenses grew to RMB 80.51 million or US$11.79 million from RMB 60.29 million in the preceding year. Cost of revenues was RMB 64.38 million or US$9.43 million, an increase of 23.1% from RMB 52.3 million in the earlier year. The increase was primarily due to higher media resource underwriting costs for CCTV-4, the company noted. Sales and marketing expenses increased 267.5% to RMB 5.24 million or US$766 thousand from RMB 1.42 million in the prior year, mainly due to an increase in salaries and other compensation resulted from the recruitment of additional sales employees. General and administrative expenses were RMB 10.89 million or US$1.59 million, up 65.9% from RMB 6.56 million in the preceding year as a result of additional expenses incurred as a publicly listed company in the U.S., including employee share-based compensation expenses and consultancy fees incurred in relation to internal control improvement projects. For the third quarter, the company currently expects to generate total net revenues of RMB 65 million to RMB 75 million or US$9.5 million to US$11 million.
Shengcheng Wang, chairman and chief executive officer said, "Looking forward, one of the biggest national events of the year will occur in the third quarter of 2009 with the celebration of the 60th anniversary of the founding of the People's Republic of China. CCTV has prepared a series of themed programs for the celebrations, and we have seen substantial interest in the related advertising time slots. As a result, we believe our sales are likely to begin to rebound in the second half of the year due to this event." In addition, Eric Cheung, chief financial officer said that the company is currently reviewing certain market opportunities to further expand its media resources and therefore have decided to defer the declaration of a dividend to a later stage.
CMM is currently trading at $4.42, down $0.62 or 12.23%, on a volume of 78 thousand shares.
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