European Economic Recovery Presents Divergent Fortunes for Companies

By Manuela Mesco and Christopher Bjork 

The mixed economic picture across Europe was reflected in sharply different moods among some of the continent's top executives.

In Italy, which posted a surprise contraction in the first quarter, signs of decline caused by the continent's economic crisis and its lingering repercussions are still evident. Italian cafes and restaurants are still struggling and many are continuing to close down as Italians forgo eating out. Matteo Lunelli, chairman of Italian wine company Ferrari, said that the number of his customers--mainly cafes and restaurants--who fail to pay for their orders has increased in the past 18 months.

"It will take a long time before we see a real recovery," said Andrea Illy, chairman and chief executive of coffee maker Illy Caffe. "I'm really skeptical on how and if we can grow, and I hear the same feelings among entrepreneurs and consumers in Italy. We can have a growth opportunity in the short term...but then we need some reforms, which I'm not seeing around right now."

Still, some senior executives are spotting signs of economic recovery, even in Italy. Drinks group Davide Campari-Milano SpA's Italian revenue grew for the third quarter in a row, climbing 5% in the first quarter of the year compared with a year earlier. Part of the reason is a more stable political situation in Italy and across Europe, following years of uncertainty as governments struggled with the economic crisis and lingering aftermath, said Bob Kunze-Concewitz, Campari's chief executive.

"Politics offers positive messages," he said. "And this is supporting Italian consumers' confidence. We see this everywhere."

Many companies have also clawed out new markets after struggling for years with flat or shrinking business in Europe. "We hit the bottom" in Europe, said Mr. Illy. "So everyone is looking for alternative growth opportunities." Mr. Illy said that his company, which makes around 40% of its revenue in Italy, has boosted exports outside Europe this year.

In Spain, which saw a modest pickup in growth in the first quarter, television broadcasters are starting to see a pickup in advertising--another sign of growing confidence across European corporate boardrooms. Massimo Musolino, general manager of Mediaset Espana Comunicación SA, said that after more than two years of declines in the advertising market, the country's largest broadcaster has seen a turnaround taking shape in the past two quarters.

"We expect a recovery in private consumption in coming months," Mr. Musolino said on a conference call last week. "This doesn't mean that Spain has reversed to precrisis levels, but it suggests that the worst is over and we are now on the road to recovery," he said.

Write to Manuela Mesco at [e-mail] and Christopher Bjork at [e-mail]