TOKYO Japan’s largest advertising agency, Dentsu Group Inc, on Thursday reported a 54% slump in second quarter operating profit as the coronavirus outbreak hit advertiser spending.
The result beat analysts expectations, though the pandemic has forced the advertising giant to withdraw earnings guidance, and it expects the April-June quarter, in which revenues fell 16%, to be the weakest.
Dentsu has traditionally enjoyed fat profit margins by leveraging its dominant position in Japan’s ad market but the COVID-19 pandemic and resulting delay to the Tokyo 2020 Olympic Games have hurt spending by clients.
Peer Hakuhodo DY Holdings again reported big sales contractions in parts of its advertising business in July. Uncertainty remains with any further spread of the virus raising the risk of a further hit to spending.
Dentsu, which enjoys close ties with politics and business, has been under scrutiny over its involvement in a government contract outsourcing running of a scheme to aid virus hit companies.
Second quarter operating profit was 4.1 billion yen ($38 million), better than an average estimate of 1.8 billion yen from three analysts polled by Refinitiv SmartEstimate.
($1 = 106.6700 yen)
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