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Lagging newspaper and digital sales continued to plague Torstar Corp. TS.B-T as the company turned a year-ago loss into a modest profit in the third quarter on lower corporate costs and continued growth at its book publishing division.

The media company that owns the Toronto Star and other newspapers, as well as the Harlequin book-publishing business, reported Wednesday net income of $4-million, or 5 cents per share, in the quarter ended Sept. 30.

This was an improvement from a year-ago loss of $740,000, or 1 cent per share.

Revenue for the quarter totalled $343.7-million, down 7.4 per cent from $371.3-million last year.

“We felt we had a reasonable quarter in the operations, given the challenges of the current economic environment,” David Holland, Torstar's interim president and chief executive officer, said on a conference call with analysts.

“The newspapers and digital divisions went down, Harlequin continued to perform very well and corporate costs were down,” he said.

Revenue in the company's newspapers and digital operations was down 12.6 per cent to $221.2-million for the quarter.

Much of this came from a decline in employment and real estate advertising sales, which Mr. Holland said were particularly vulnerable to the slumping economy.

This was partly offset by positive news in the company's Harlequin romance fiction book business which posted revenue of $122.5-million, a 3.7 per cent increase from last year.

Mr. Holland added that the quarter's results were significantly affected by losses from associated business.

In particular, Torstar said its 20 per cent stake in CTVglobemedia Inc., owner of CTV Inc. and The Globe and Mail newspaper, resulted in a loss of $13.6-million in the third quarter.

This was quadruple the loss of $2.8-million a year ago. Torstar has a minority stake in the television and newspaper operator, whose partners include the Thomson family's Woodbridge Co. Ltd. investment company, with 40 per cent; Ontario Teachers' Pension Plan, with 25 per cent; and Bell Canada, with 15 per cent.

Mr. Holland added, however, that Torstar was committed to its stake in CTVglobemedia and had no plans to pull out before its five-year investment, which began in 2006, is up.

As revenue declined, Torstar said cost-cutting efforts were mitigating part of the slide in sales on the company's newspaper and digital side. Mr. Holland said this aggressive cost containment will continue in the next quarter.

Evidence of this is already being seen. On Tuesday, Torstar announced a major restructuring at the Toronto Star, which would see employees in all parts of the flagship newspaper offered voluntary buyouts.

The company said restructuring and related charges in the newspapers and digital division amounted to $1.1-million in the third quarter, compared to $3.4-million a year ago.

Torstar said the charges reflect the ongoing focus on reducing operating costs in the Star Media group and the Metroland Media group, which includes daily newspapers in Hamilton, Waterloo Region and Cambridge and community papers throughout Southern Ontario.

The restructuring is expected to bring about $1.3-million in annual savings and a reduction of about 18 positions. Torstar said additional savings of $7.9-million are expected in the fourth quarter related to restructuring efforts that took place in 2008 and in the first six months of 2009.

“Given the challenges confronting us, efforts on restructuring are ongoing,” said Mr. Holland. “We don't have the luxury of not acting on an opportunity that presents itself.”

Star publisher John Cruickshank reassured investors and customers, however, that the restructuring at Canada's largest-circulation daily paper would not compromise its products.

“We're going to do this in a way that will protect our ability to go on generating great stories,” he said.

He added that the Star would be negotiating with the Communications, Energy and Paperworkers union over the outsourcing of copy editing and pagination jobs while staying committed to maintaining pre-press quality.

On the community newspaper side, Metroland president Ian Oliver said lower expenses from cost control initiatives and lower newsprint costs helped offset high pension costs.

The sluggish sales on the newspaper side aren't expected to pick up soon.

“Looking forward, we continue to experience the impact of this economic downturn on our newspapers and digital division,” said Mr. Holland. “We are anticipating difficult revenue trends to continue until the economy in this region starts to gain some momentum.”

Mr. Holland added, however, that newsprint pricing, which had a favourable impact in the third quarter, was expected to continue positively until the end of the year.