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Warner Music Group, one of the world’s largest music companies, narrowed its losses in the fourth quarter as a continued surge in digital music downloads was supplemented by rare gains in CD and vinyl sales.

Overall, Warner, which went public this year, shrank its loss to $30m, or 21 cents per share, compared with $137m, or $1.27 per share, for the same period last year. Its revenues surged 13 per cent to $905m, far exceeding Wall Street expectations.

On Thursday, the company’s shares closed up 5.4 per cent at $19.05.

After seeing five years of sales growth wiped out by piracy and illegal file sharing, Warner’s latest results suggest the company is gradually adapting to a digital future.

For the fourth quarter, it racked up $53m in digital music sales, which was three times the levels of a year ago and 20 per cent higher than the previous quarter. More importantly, Warner said the full-year growth in digital music sales offset the declines in US CD and vinyl sales.

In a note to investors, Bank of America hailed the performance as “an important inflection point in the transition from the traditional physical music business to the emerging digital market for music sales”.

Edgar Bronfman Jr, Warner’s chief executive, said he expected digital sales to rise as the company gained deeper penetration in Europe, which accounted only for about one-quarter of its online business.

In addition to the online growth, Warner also posted a 9 per cent gain in sales from new releases during the quarter on the strength of albums from Eric Clapton and Madonna.

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