ZURICH Adecco ADEN.VX, the world's No. 1 staffing agency, posted a 61 percent jump in net profit in the third quarter and flagged rising demand for temporary workers as companies look for flexibility to weather a volatile European economic recovery.
The staffing sector is generally seen as a barometer of economic health because companies tend to hire temporary workers at the beginning of a recovery when most businesses are reluctant to commit to full-time hiring.
Chief Executive Patrick De Maeseneire told Reuters that uncertainty about the underlying health of the continental economy would keep demand for temps buoyant.
"With two crises behind us, companies will be hesitant to hire fixed workers. There are going to be bumps along the road and there is also no scarcity, so why would companies hire fixed and pay more in terms of charges and benefits?"
On Tuesday, the European commission trimmed its expectations of growth for the euro zone next year, with weaker private demand and investment expected to hold back momentum.
Adecco has cut costs during the crisis. Net profit was 191 million euros in the third quarter compared to 118 million a year earlier, beating the average analyst poll forecast of 137 million euros.
Excluding currency effects, revenue was stable at 5.033 billion euros, marking an end to five quarters of declines in constant currency terms. The Swiss company returned to growth in October and expects to post strong single-digit growth for the full year 2014.
Shares in Adecco had jumped 5.7 percent to 69.80 Swiss francs by 0830 GMT (3:30 EDT), touching a six-year high.
"As European countries exit recession we expect to see further growth into 4Q13 and next year with a favorable impact on profitability," said Vontobel analyst Michael Voeth, who has a 'buy' rating on the stock.
EARLY CYCLE DEMAND
Adecco, which makes around 60 percent of its revenue in Europe, said demand was being driven by industrial staffing. It noted a strong pick-up in demand in Spain and Italy - countries which have only recently started to emerge from recession.
De Maeseneire said manufacturing had returned to growth in Germany, with demand in the automotive and aerospace sectors particularly encouraging.
In France, the company's biggest market, revenue fell 5 percent, although the rate of decline was slower than in the second quarter. French power and engineering firm Alstom (ALSO.PA) said on Wednesday it planned to cut 1,300 jobs worldwide.
De Maeseneire blamed a slowness to implement labor market reforms for France's underperformance, but said he expected the country to return to revenue growth in the course of the first half of next year.
North America grew 3 percent, driven by industrial staffing. One weak spot remains, however - the financial services sector, and the company is not expecting this to change in the near future.
Adecco confirmed its target for earnings before income tax and amortization (EBITA) margin to represent more than 5.5 percent of revenue by 2015.
(Reporting by Caroline Copley; editing by Elizabeth Piper and Tom Pfeiffer)