Japan's Dentsu agency eyes profit slump


The marketing bonanza surrounding the imminent World Cup will lead to a special boost of around 50 billion yen

TOKYO, Japan -- Japanese advertising agency Dentsu Inc. will post a profit drop of more than one quarter when it reveals its first full-year results since going public, a report states.

Dentsu is Japan's largest advertising agency, cornering roughly 30 percent of the market. But despite the boost expected from the runup to the soccer World Cup tournament, the economic downturn has hit it hard.

Dentsu will see net profit fall 26 percent for the year ended March 31, to 20 billion yen ($156.1 million), according to the Nihon Keizai Shimbun.

Total sales shrank, falling 2 percent to 1.72 trillion yen ($13.4 billion), according to the business daily, which quoted company sources.

Dentsu anticipates a special gain of 50 billion yen stemming from the world's largest sporting event taking place on its home turf.

The World Cup starts in South Korea on May 31 and runs through June to the final in Japan. Teams like Brazil and Argentina are now naming their squads (full stories on: Brazil, Argentina).

Hit from moving headquarters

But the boon will only be realized in the first half of the business year now running, since Japan's fiscal year runs through March.

In any case, Japan's recession and moribund economy have hurt profits. That is likely to continue through the northern summer, despite the World Cup, with consumer spending hurting in Japan.

The ad agency is also looking at a special charge of up to 15 billion yen as a result of moving headquarters in November.

Advertising money for key categories such as consumer electronics, luxury goods and high-end cosmetics is likely to remain depressed until consumers and the companies that sell to them believe recovery has set in.

Dentsu stock is trading down 0.42 percent at 714,000 yen on Wednesday morning. Overall, Japan's market opened higher on car companies and tech stocks, given a slightly weaker yen.

Dentsu operates in 27 countries, and has a partnership with Young & Rubicam of the United States, but its sales outside Japan account for just 5 percent of total sales.

The company sold stock for the first time late last year, listing on the Tokyo market (full story).