Dentsu Reports 43% Drop in Net Income

Halfway Through Fiscal Year, Sees Consumers Pulling Back

By Published on .

LOS ANGELES (AdAge.com) -- Dentsu's net income tumbled and revenue shrank in the six months ended Sept. 30 as the Japanese agency holding company grappled with the slowdown in the economy and ad spending.

Dentsu, the world's fifth-largest agency firm, today posted a 43.8% drop in net income and a 5.7% decline in revenue for the first half of its fiscal year.

Net income plunged to $76.5 million based on average exchange rates for the period. Revenue (gross profit under Japanese accounting) was $1.48 billion.

Consumers under pressure
The agency firm said its results were hurt by weakening private consumption as consumers were faced with price increases in gas, groceries and "daily necessities."

"Furthermore, corporate income decreased due to the effect of an increase in the cost of raw materials and disruption in the U.S. economy, which is causing uncertainty about the future," Dentsu said. "In the advertising industry as well, clients are remaining cautious with their advertising spending, and therefore difficulties in the business environment will continue."

Dentsu forecast that net income will drop 30.5% in the year ending March 31, 2009, with a 5.4% decline in billings (net sales).

McGarryBowen acquisition still on
The company announced its results as it forged a deal to buy New York agency McGarryBowen, expanding Dentsu's still relatively small U.S. holdings.

Dentsu generated 91% of its first-half revenue in Japan.

Dentsu holds a 15% voting stake in French ad firm Publicis Groupe, largely the result of Dentsu's 22% interest in the former Bcom3 Group, which Publicis bought in 2002. Dentsu also owns a minority stake in the Asian ad network Dentsu Y&R. WPP Group, parent of Young & Rubicam Brands, owns the rest of Dentsu Y&R.
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