* 9-month net profit 1.2 million euros, down 97.2 percent
* Does not see significant changes to results for the rest of year
* Shares down 4.7 percent (Recasts, add analyst comments, background)
By Danilo Masoni
MILAN, Oct 21 (Reuters) - Italian publisher Gruppo Editoriale L'Espresso posted lower profits on Wednesday, but said circulation revenues from its top newspaper, which has led criticism of Prime Minister Silvio Berlusconi, rose, thanks to increased newsstand sales.
La Repubblica, Italy's No. 2 selling daily, has been at the forefront of covering judicial problems and a sex scandal in the past few months that have reduced approval ratings for the 73-year old centre-right premier.
Berlusconi has issued writs for a combined 4 million euros ($5.97 million) against La Repubblica, owned by businessman and longstanding Berlusconi rival Carlo De Benedetti, and another left-leaning newspaper, L'Unita, for their coverage of the sex scandal.
Tensions in the country grew as Il Giornale, a right-wing paper owned by Berlusconi's brother Paolo, ran attacks on Berlusconi's critics and dissenting allies. Il Giornale's sales also rose sharply.
"People are interested ... La Repubblica has taken a strong position (on Berlusconi) and this has certainly impacted on sales," a Milan based analyst said, asking not to be named.
The analyst said higher newspaper sales had a marginal impact on his valuation for the company, adding he had doubts about the sustainability of the trend.
PROFIT PLUNGE
"It's advertising that brings margins and at this moment more readership does not mean more advertising," the analyst said.
L'Espresso, which is cutting costs, said nine-month net profit plunged 97 percent to 1.2 million euros, as advertisers cut spending in the downturn and charges connected with cost cutting weighed.
Revenues fell 15.9 percent to 640.9 million euros.
L'Espresso said performance in the latest months did not show significant improvements, and it forecast no significant changes to results for the rest of the year.
Its shares were down 4.7 percent at 2.00 euros by 1231 GMT, having reached a year high one week ago. The DJ Stoxx media index was down 1.1 percent.
In September, sales of La Repubblica at newsstands rose 6 percent from a year earlier. According to MF newspaper, those of Il Giornale rose 44 percent.
Sales of Corriere della Sera, which has a more neutral approach on issues involving the prime minister, were up just 1 percent. Corriere, Italy's top selling daily, is controlled by top financial and industrial groups via RCS.
In January, De Benedetti, 75, announced he would leave the business scene after 50 years of activity, to devote himself only to editorial activities. He appoints editors-in-chief at L'Espresso.
His son Rodolfo is CEO of his holding company CIR, which in October won a court decision in a dispute with Berlusconi's holding company Fininvest in a 1990s battle to take over publishing house Mondadori.
The court ordered Fininvest to pay 750 million euros to CIR. Fininvest has appealed. (Editing by Rupert Winchester)