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Dentsu revenue up 12% despite overwork suicide case

Japan's largest ad agency sticks to projection of 4% growth in 2017 net profit

Dentsu President Toshihiro Yamamoto speaking to reporters in Tokyo on Oct. 6. (Photo by Kaisuke Ota)

TOKYO -- Japan's largest advertising agency Dentsu, which was convicted but only fined a nominal amount in October for illegally forcing its employees to work long hours, on Tuesday reported a net profit of 44.5 billion yen ($390 million) for the nine months through September, down 13% on the year.

The company blamed the profit fall partly on increased costs incurred in rectifying the culture of overwork, which caused a young female employee to kill herself in 2015. Dentsu was fined just 500,000 yen ($4,400) in October. It now says it has spent money to help workers improve productivity, such as the purchase and use of mobile tools and robots and allowing employees to work in satellite offices, though the company did not disclose how much these measures cost.

Dentsu President Toshihiro Yamamoto told reporters on Oct. 6, after the Tokyo court decision, that changing the culture of working long hours would weigh on its earnings. "We have cut working time before achieving ideal productivity," he said.

Dentsu's revenue for the nine months rose 12% to 657 billion yen, and unconsolidated revenue fell only 2%. Although the ad agency was banned from bidding for some public projects that might have affected its revenue, an official said the decrease in Olympics-related sales -- which benefited the company last year -- had a much bigger impact.

The labor authority had referred Dentsu's case to prosecutors last December and the company was indicted in July. As such, the official said that impact of the bidding ban was felt earlier in the year, and its revenue for the last quarter was unlikely to be affected.

On Tuesday, Dentsu maintained its net profit projection for 2017 at 86.8 billion yen, a 4% rise from 2016. Dentsu's unconsolidated monthly sales for October rose 0.8% from a year ago.

Hakuhodo DY Holdings and Asatsu-DK, the second and the third largest groups, which released quarterly reports earlier this month, also stuck to their earnings projection for the current fiscal year.

Asatsu-DK is in a spat with its largest shareholder, global advertising and marketing agency WPP which holds 25% in the company, over its plans to delist. Asatsu-DK wants to be taken private by private equity firm Bain Capital, but WPP had objected due to what it said was an undervaluation of the shares.

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