UPDATE: Economic Fears Hit Adecco As Market Momentum Slows
August 10 2011 - 5:43AM
Dow Jones News
Adecco SA (ADEN.VX) Wednesday was hit by investor fears that the
ongoing financial crisis could soon hurt job markets in
industrialized economies as it warned of slowing business in July,
even as the world's largest staffing company posted a 45% jump in
second-quarter net profit.
The investor skepticism pushed Adecco's shares almost 7% lower
in early trade, against the overall positive trend in Switzerland.
At 0847 GMT, the shares were down 4.8% at 36.8 Swiss francs, adding
to the stock's 36.8% drop this year.
The Zurich-based company said net profit for the three months to
end-June rose to EUR141 million from EUR97 million, beating analyst
forecasts of EUR125 million as Adecco registered double-digit
growth in the U.S. and France, its two major markets.
Sales were also above expectations, rising 11% to EUR5.17
billion from EUR4.65 billion, as demand in the automotive sector in
Italy and Germany also helped boost revenue and as business in
emerging market continued to thrive.
But analysts and investors said the growth rates weren't enough
to disperse concerns over Adecco's ability to protect itself
against cooling economies in Europe and the U.S. as the financial
crisis is expected to hurt consumer demand and curb economic
growth.
Furthermore, job markets in countries such as the U.S., Spain
and the U.K., although they have improved from recession lows, are
still weak. And concerns are rising that any new jobs generated
will be in emerging markets, where Adecco's market presence is
still comparatively small and where profit margins are lower.
"In this market environment, the sales rise was too little to
impress," said Robert Scholl, asset manager at the 8.5 billion
Swiss francs ($11.6 billion) pension fund Aargauische
Pensionskasse. "And fears are that the industrial and automotive
sector in Europe and the U.S. could soon be hurt again if the
global economy cools off and Europe and the U.S. fall into
recession," Scholl said.
Chief Executive Patrick De Maeseneire tried to disperse some of
these fears, saying "there are no warning signals that clients are
reducing the number of temporary staff." While he said that
business was "a touch lower" in July, he also cautioned that it was
important how the market will develop after the holidays in
September.
De Maeseneire's outlook comments failed to imbue investor trust
as the market is aware that Adecco's ability to read market trends
is limited. The company is only able to predict developments about
one month ahead.
During the last crisis, Adecco, which leads the market ahead of
competitors such as U.S.-based Manpower Inc (MAN) and Randstad
Holding NV (RAND.AE), lost around 30% of revenue and had to launch
a hefty cost cutting program to protect profit margins and keep
losses in check.
Its attempt to place more professional staffers such as lawyers
and IT specialists helped it keep up margins and Chief Financial
Officer Dominik de Daniel said Adecco was confident the demand for
highly specialized staff will continue to perform well.
-By Goran Mijuk, Dow Jones Newswires, +41 43 443 80 47;
goran.mijuk@dowjones.com
(John Revill in Zurich contributed to this article.)
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