April 27, 2017 / 3:17 PM / a year ago

UPDATE 1-Shares in Mexico's Televisa drop on weak advertising sales

(Adds impact on stock index, comment from executive)

MEXICO CITY, April 27 (Reuters) - Shares in Mexican broadcaster Grupo Televisa slid more than 7 percent on Thursday before paring losses after it reported a drop in first-quarter advertising sales, dragging on Mexico’s stock index.

Grupo Financiero Banorte changed its outlook for the stock to “hold” from “buy” on Thursday, noting the company’s weak sales and its slowdown in revenues from cable television.

Televisa’s shares were down more than 5 percent in mid-morning trading, and Mexico’s IPC stock index had slipped 0.20 percent.

Televisa, the world’s largest provider of Spanish-language content, reported a 7.8 percent drop in advertising sales in the first quarter from the same period a year earlier, which contributed to a 3.1 percent decline in content revenue.

The company said the decline was driven by weaker investments in TV advertising from banking and telecommunications companies, and that two major clients had taken their business to competitors that offered promotions.

“Our sales force has been in contact with our advertising clients and based on those conversations, it believes that the first quarter of the year is not representative of the likely outcome of the balance of the year,” Executive Vice President Alfonso de Angoitia said on a conference call with investors.

Televisa posted a 125 percent rise in net profit in the first quarter largely due to currency fluctuations. Mexico’s peso appreciated about 9 percent from January to March.

But the company’s overall growth in the quarter was “unusually slow” because of soft economic growth in Mexico that weighed on disposable income and lingering uncertainty after the U.S. election that dampened consumer confidence, De Angoitia said.

The company said it expected the first half of 2017 to be challenging but that the second half of the year would likely be more positive.

Reporting by Miguel Angel Gutierrez and Gabriel Stargardter; Editing by Meredith Mazzilli

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