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Adecco sees hard times for Europe's job seekers
ZURICH (Reuters) - Job markets in the euro zone are unlikely to emerge from a paralyzing debt crisis anytime soon, Adecco (ADEN.VX), the world's largest temporary staffing group, said, as it reported big falls in revenues from markets like France, Spain and Italy.
Adecco, which like other temporary staffing companies acts as a bellwether for wider labor markets, reported better-than-expected second-quarter profits, but revenues missed forecasts and shrank in July, weighing on its ability to keep eking profits out of core European markets.
"We shouldn't expect anything positive for the euro zone overall before next year," Chief Executive Patrick de Maeseneire told Reuters in an interview on Thursday.
Revenues slowed in Japan as well as Europe in July, the Switzerland-based company said, adding it would continue to focus on strict price discipline and cost control.
Adecco shares were trading 2.3 percent lower at 43.80 Swiss francs by 6:24 a.m. EDT (1024 GMT), as economic factors overshadowed results that were solid overall, and should get support in the medium-term from the group's ongoing 400 million euro share buyback program, analysts at Bank Notenstein said.
Many employers have been reluctant to commit to full-time hiring, preferring temporary workers as a way of staying flexible in case the recovery falters. Nevertheless, the temporary staffing sector is not immune to a full-scale recession.
Adecco generates roughly 60 percent of its sales in Europe and has strong exposure to markets in Southern Europe where governments are imposing searing budget cuts and battling record high unemployment.
Adecco, which competes with Dutch group Randstad (RAND.AS) and U.S. company Manpower (MAN.N), said second-quarter net profit fell 20 percent to 113 million euros ($140 million), weighed by integration and restructuring charges and a higher tax rate, but 13 percent ahead of forecasts.
The company also confirmed its medium-term target of a 5.5 percent margin on earnings before interest, tax and amortization (EBITA). In the second quarter, it only achieved a margin of 3.7 percent, implying it believes it can boost profitability by half.
PROFITABILITY REMAINS KEY
De Maeseneire said the company would rather give up market share than compromise on profitability and would therefore not engage in unreasonable price wars.
"If you look at our profitability, also in France with a 13 percent decline in sales, our EBITA-margin is only down 30 basis points year-on-year," he said.
Europe's biggest economies endured another turbulent month in July as businesses battled slumping demand. Purchasing managers indexes (PMIs), which gauge business activity and have a good record of tracking economic growth, showed order books at euro zone companies shriveled last month as a downturn in Germany and France became more entrenched.
Adecco, which is providing staff for the London Olympics, said total revenues fell 4 percent to 5.20 billion euros, with France, Spain, Portugal and Italy posting double-digit falls.
Even Germany, so far Europe's growth driver, slipped 1 percent.
North America bucked the trend with a 2 percent rise, driven by professional staffing, while Japan fell 10 percent as the strong demand for temporary employment in the wake of last year's tsunami and the Fukushima disaster came to an end.
(Editing by Dan Lalor and Helen Massy-Beresford)
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