Dentsu Soken (4812) Q3 2024 earnings summary

Executive summary

• Net sales for the third quarter of FY2024 rose 6.6% year-over-year to ¥112,231 million, driven by growth in Financial and Manufacturing Solutions, but progress toward the full-year plan lagged at 72.4% versus 73.8% last year.

• Operating profit declined 7.0% year-over-year to ¥14,463 million due to a significant increase in SG&A expenses, mainly from higher personnel costs.

• Profit attributable to owners of parent decreased 7.0% year-over-year to ¥10,074 million.

• Orders received in Q3 increased 9.4% year-over-year, especially in Business Solutions, but did not meet expectations for second-half net sales growth.

• The company completed a rebranding and expanded business functions, including the acquisition of Mitsue-Links Co., Ltd.

Financial highlights

• Cumulative net sales for 3Q FY2024 reached ¥112,231 million, up 6.6% year-over-year.

• Gross profit increased to ¥40,424 million from ¥37,859 million year-over-year, with a stable gross profit margin of 36.0%.

• Operating profit fell 7.0% to ¥14,463 million, and ordinary profit dropped 8.2% to ¥14,413 million.

• SG&A expenses rose to ¥25,961 million from ¥22,307 million year-over-year.

• EPS for the nine months ended September 30, 2024 was ¥154.83, compared to ¥166.56 in the prior year.

Outlook and guidance

• Full-year FY2024 net sales forecast revised downward to ¥152 billion (6.6% growth year-over-year), operating profit to ¥20 billion (-11.1% from previous guidance), and profit attributable to owners of parent to ¥14 billion.

• Fourth quarter net sales expected to grow 6.5% year-over-year, with operating profit up 1.1%.

• Net profit forecast lowered to ¥14,000 million, with EPS expected at ¥215.14.

• Next medium-term plan targets net sales of ¥210 billion and a 15.0% operating margin by FY2027.

• Downward revision attributed to lower-than-expected sales and profit margins, and higher SG&A expenses.