Discovery forecasts bigger hit to 2015 revenue from dollar

By Sai Sachin R (Reuters) - Discovery Communications Inc , the owner of Animal Planet and the Discovery Channel, warned of a bigger hit from a strengthening dollar and said costs would increase in the coming quarters. The company said it now expects a $425 million hit from the dollar to its revenue for the full year, up from the $350 million it had earlier forecast. The forecast is on a constant currency basis net of hedging strategy, said the company, which gets nearly half its revenue from outside the United States. The dollar <.DXY>, which has surged about 20 percent against a basket of major currencies, is expected to continue to gain, making revenue denominated in other currencies less valuable in dollar terms. Discovery Communications also said on Tuesday that it expects costs to climb up in its U.S. networks in the current quarter and the next due to increased marketing and the timing of some content. Growth in the company's adjusted operating income before depreciation and amortization (OIBDA) will lag its revenue growth this quarter, hurt by increased spending on content at its Eurosport channel. A 2 percent drop in operating costs helped Discovery's U.S. networks report a 6 percent rise in adjusted OIBDA, excluding the impact of the consolidation of the Discovery Family channel, for the first quarter ended March 31. The company's quarterly profit beat the average analyst estimate as total margins increased 2 percentage points to 39 percent on an organic basis, Chief Financial Officer Andy Warren said on a post-earnings call. Total adjusted OIBDA increased 8 percent to $568 million, helped by "cost-driven upside in both major geographic segments", said Cowen & Co analysts, who had expected $512 million. Higher rates and increased subscribers in Latin America helped Discovery increase distribution revenue by 17 percent in international networks and 13 percent in U.S. networks. Total revenue from U.S. networks rose 6 percent to $749 million, and from international networks increased 10.2 percent to $735 million. Total revenue increased 9 percent to $1.54 billion. First-quarter net income available to Discovery rose to $250 million, or 37 cents per share, from $230 million, or 33 cents per share, a year earlier. Excluding items, the company earned 42 cents per share, beating the average analyst estimate of 35 cents, according to Thomson Reuters I/B/E/S. Discovery shares were down nearly 1 percent at $33.12 after on the Nasdaq in midday trading. (Additional reporting by Abhirup Roy in Bengaluru; Editing by Saumyadeb Chakrabarty and Joyjeet Das)