Dentsu Aegis profit slides 2.7 percent

Dentsu Aegis Network has reported a decline in quarterly profit for the first time in over two years.

Quarterly organic gross profit for DAN’s second quarter of 2017 fell by 2.7 percent—a significant reversal on the 7.2 percent growth it reported for the same period last year and 10.2 percent growth in Q2 2015.

Dentsu said the decline was "impacted by strong performance" against previous year-on-year periods, as well as "challenging market conditions" and new business wins that will not be realised until the third quarter.

APAC organic gross profits declined by 3.8 percent, according to the company, placing the region in between EMEA (down 0.3 percent) and the Americas (down 4.1 percent).

In APAC, excluding Japan, through the first half of the fiscal year, DAN reported total gross profit growth of 5.9 percent with a 0.2 percent decline in organic gross profit. Taiwan and India performed well while Australia and China experienced weaker growth, but are expected to deliver stronger performance in the second half, an APAC spokesperson said.

Analysts at Liberum reported that Dentsu has lowered its projection of full-year net sales by 1.5 percent on the back of weaker spending commitments by FMCG companies at the start of the year.

"We believe that the weakness in the consumer packaged good companies' spend is cyclical and point to comments from the big FMCG companies that suggest a rise in marketing spend in H2," Liberum told investors. 

In June, DAN’s global chief executive Jerry Buhlmann told Campaign "the direction of travel is down" as the network downgraded its growth forecast for the global ad market to 3.8 percent this year compared to 4.8 percent in 2016.

Buhlmann also warned about a "slowdown" in digital advertising in the wake of the brand safety row earlier this year involving YouTube and other online platforms.

Dentsu Aegis Network’s clients include Adidas, Burberry, Diageo and General Motors. 

Toshihiro Yamamoto, president and chief executive of Dentsu, said of today's disclosure: "Going into the second half of the year, despite uncertain market conditions, the group is well placed to realise the positive impact of strong new business wins in the first half of 2017."