Another European company blames the economy for a profit warning

Europe has seen back-to-back days of profit warnings from two companies in sectors considered to be bellwethers for broader business activity. Both cited the economy.

After German chemicals giant BASF SE sent ripples through numerous industries on Tuesday, British recruitment firm PageGroup Plc warned of a growth slowdown at home, weaker macroeconomic conditions in much of continental Europe, and a challenging market in China.

Its stock sank as much as 16%, the most since 2016’s Brexit vote, while weighing on U.K. rival Hays Plc, as well as Amsterdam-listed Randstad NV and Switzerland’s Adecco Group AG.

The warning comes as economists say the U.K. economy probably contracted in the second quarter, although GDP figures out Wednesday indicated that Britain recorded growth in May. Meanwhile, the European Commission cut its forecast for the euro area next year.

Although BASF’s market value dwarfs that of PageGroup, staffing is among the sectors that can often provide insight into broader economic activity.

‘Start of Downturn’

PageGroup’s results reflect a lower level of confidence among candidates to change jobs, and some reluctance among corporations to recruit staff, ABN Amro analyst Konrad Zomer commented by email. “This normally happens at the start of an economic downturn,” he said.

Slowing global macroeconomic and hiring data seen year-to-date are finally filtering through to net fees growth and, ultimately profits, Bloomberg Intelligence’s Eshan Toorabally added.

PageGroup’s warning comes just a day after analysts at Goldman Sachs Group Inc. cut their ratings on both Randstad and Adecco to sell, saying macroeconomic data suggest hiring may have “taken a turn for the worse.”

Source from: The Peninsula