Philippe Dauman, chief executive with Viacom Inc. (VIA), said Wednesday that the company's film studio, Paramount Pictures, is an "improving situation."

Dauman, at an investor conference hosted by Sanford C. Bernstein, listed Paramount's ongoing "turnaround" as a factor that will deliver long-awaited gains for shareholders as efforts to improve its performance bear fruit.

Sagging profit margins at its film division has been a headache for the media conglomerate's investors as its stock price has declined sharply since it was separated from CBS Corp. (CBS) in early 2006.

In the first quarter, operating losses at Viacom's film division almost doubled, and Citigroup analyst Jason Bazinet said the company may wind up selling Paramount, which he values at $3.8 billion - down from the $10 billion the company paid for the studio in 1994.

Dauman said Paramount remains an important piece of Viacom's portfolio because the studio can be used to promote its cable network brands, like Nickelodeon and MTV.

"We have a very good marketing machine within our organization," said Dauman.

He noted that the company recently slashed costs at Paramount and restructured the business with measures like folding its Paramount Vantage label into the larger studio that will result in annual savings of $50 million.

He also said Paramount's strategy of releasing fewer films and focusing its investment on proven film franchises will improve its performance. The company has enjoyed recent success with the release of its new Star Trek movie, and it has new installments coming up for hit franchises like Transformers, Iron Man and GI Joe.

-By Nat Worden, Dow Jones Newswires; 201-938-5216; nat.worden@dowjones.com