UPDATE: Adecco 3Q Net Beats Views As US, French Job Market Turns
November 05 2009 - 5:25AM
Dow Jones News
Adecco SA (ADEN.VX) Thursday reported a better-than-expected
third quarter net profit as the world's largest temporary
employment firm benefited from a pick-up in demand for blue-collar
workers in the U.S. and France.
The result raised hopes that global employment markets could
slowly recover after months of persistent weakness that has
catapulted jobless rates to record levels and has triggered
concerns that hiring will remain low even as the global economy
moves out of recession.
Although the Zurich-based firm's net profit fell 46% to EUR90
million from EUR168 million a year-earlier, the result easily beat
analyst calls for a bottom line result of EUR50 million as Adecco
was able to slash costs and slow the steep sales decline of the
past.
While sales still dropped 27% to $3.72 billion from EUR5.10
billion, the decline was less severe than in previous quarters when
revenues fell more than 30% amid sluggish job demand in the U.S.,
France and Germany.
"We are very pleased with the evolution of the market (in the
U.S. and France)...and our cost-cut efforts", said Chief Executive
Patrick de Maeseneire, adding that the improving market trend has
continued into October.
The company said demand has risen for the temporary placement of
industrial workers in the U.S. and France, Adecco's two key markets
that generate more than half of the company's annual revenue.
In the U.S., sectors such as car manufacturing, transport and
telecommunications increased hiring, Adecco said, noting that the
pick-up was marked in the South as well as in the Mid-West.
In France, the automotive, chemical and transport sectors saw
increased temporary hiring.
Analysts and investors welcomed the results as a first signal of
a potential job market turnaround but warned that the coming
quarters will remain challenging, as some market segments are still
weak.
"This is an important indicator for the staffing industry and
gives a first indication for a trend reversal," said Bank Vontobel
analyst Michael Foeth, who rates the stock at buy.
Shares of Adecco, which have risen 13.1% in the past year amid
hopes for a job market recovery, rose 2.6%, or CHF1.36, to CHF49.9
in early trade in Zurich.
Demand for permanent placements, meanwhile, remained slow as
well as the hiring of specialized workers such as lawyers,
financial advisors and medical staff. However, the company
suggested that these professional staffing segments could improve
at a later stage.
"Demand for professional staffing services as usual is expected
to pick up later in the cycle," said Chief Financial Officer
Dominik de Daniel. Adecco declined to make a specific forecast for
the turnaround of this market segment.
Many economist in the U.S. are concerned that the jobless rate
will remain close to 10% for the months to come even as the U.S.
economy is growing again because companies will continue to curb
costs and consumers will limit spending.
Similar fears exist in Europe, where jobless rates are expected
to rise through 2010 as many companies, which have introduced
short-time working hours, are expected to first introduce normal
working hours schemes before hiring new staff.
Zuercher Kantonalbank analyst Marco Strittmatter, who rates the
stock at market overweight, shared this view and said Adecco will
have to keep a close eye on costs as pricing pressure will remain
high. Adecco's closest competitors, such as world number two
Manpower Inc (MAN) and the third-largest staffing company by sales
Randstad Holding NV (RAND.AE), have already warned that margins
would stay depressed.
Adecco, which recently bought peer MPS Group Inc for $1.3
billion in an effort to broaden its foothold in the U.S., said it
would continue to reduce costs as pricing levels are expected to
remain under pressure as many companies are still avoiding to hire
staff, especially in Germany, which has introduced broad
short-working hour schemes, and the U.K., which is still mired in
recession.
Company Web Site: http://www.adecco.com
-By Goran Mijuk, Dow Jones Newswires, +41 43 443 80 47;
goran.mijuk@dowjones.com
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