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 EUR3.72 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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