McGraw-Hill profit falls 22 percent on drop in textbook, ratings sales

McGraw-Hill Cos., the owner of Standard & Poor's ratings service, reported first-quarter profit fell 22 percent and lowered its 2009 sales forecast as the recession suppresses demand for new textbooks and debt ratings.

Net income declined to $63 million, or 20 cents a share, from $81.1 million, or 25 cents, a year earlier, the New York- based company said today in a statement distributed by PR Newswire. Sales fell to $1.15 billion, in line with the average of five analysts' estimates compiled by Bloomberg.

The company said it expects sales this year to fall as much as 5 percent, more than the 1 percent to 2 percent decline it previously forecast. McGraw-Hill reaffirmed its profit forecast as Chief Executive Officer Harold McGraw continues to cut expenses across the company's financial-services, education- publishing and media units.

McGraw-Hill fell 4 cents to $29.03 yesterday in New York Stock Exchange composite trading. The shares have gained 25 percent this year.

Some areas of new credit issuance began rebounding in the first quarter, offset by lower demand for some of the riskiest types of debt.

Borrowers sold $12.6 billion of high-yield bonds in the first quarter, compared with $4.4 billion from September to December and $10 billion in the same period last year, Bloomberg data show. U.S. investment-grade companies raised $384 billion in the first quarter, compared with $211 billion a year ago.

Oversight Law

Last week the European Union approved its first direct regulation of S&P, Moody's Corp., Fitch Ratings and other credit-rating companies blamed by lawmakers for ignoring risks that led to the financial crisis. EU governments and the European Parliament adopted a law imposing oversight of rating companies and setting requirements to limit conflicts of interest.

The measure bans advisory services by the firms, bars analysts from participating in fee negotiations and mandates that they rotate assignments to remain independent from clients.

Moody's, the world's second-largest credit-rating company, is scheduled to report earnings tomorrow. The company will probably post earnings excluding some items of 34 cents a share on revenue of $393 million, the average estimates of analysts in a Bloomberg survey. In the year-earlier quarter Moody's reported profit of 48 cents a share on sales of $430.7 million.

McGraw-Hill plans to hold its annual shareholder meeting tomorrow in New York.