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Dentsu set to post bigger-than-expected drop in profits

TOKYO - Dentsu, the world's fifth-largest advertising agency, is set to post a bigger-than-expected decline in profits, predicted to be down as much as 34% year on year.

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Dentsu, Japan's largest advertising agency, has been hit hard by Japan's weakened economy and blamed the fall on budget cuts from clients in the information and communications sectors.

Analysts are expecting Dentsu to report a net profit of £148m and sales of 1.77 trillion yen. Earlier this month, a much smaller 14% drop to £272m was predicted.

Earlier this year, Dentsu estimated a group net profit of £160m, but said it would likely miss its targets due to a slump in revenues.

Dentsu, which controls 25% of the Japanese market, will unveil its results on Wednesday at 6am GMT.

Dentsu said sales for the 12 months to March 2002 totalled 1.433 trillion yen, below its forecast for 1.45 trillion yen. Monthly sales have been falling year-on-year since August 2001.

It is also suggested that revenues from the upcoming World Cup, widely tipped to be the saviour of the Asian advertising industry, are unlikely to make up for the losses in revenue. Added to this, consumer goods advertisers, which have traditionally been the most resilient spenders during recessionary times, are not thought to be increasing adspend.

The agency is also likely to be hit by costs involved in moving its head office, scheduled for November this year. It refused to comment on the stories until it posts its results on May 15.

Dentsu is set to take a 15% stake in the merged Publicis and B|Com3 group, having previously held a stake in B|Com3.

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