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Switzerland's Adecco SA (ADEN.VX), the world's largest recruitment firm by sales, Tuesday warned that the staffing market will continue to be challenging in the months ahead as it reported a second quarter net loss on sliding sales and goodwill impairments on recent acquisitions.

The company, which competes with the likes of Manpower Inc. (MAN) of the U.S. and Netherlands-based Randstad Holding NV (RAND.AE), said it believes it is well-placed to take advantage of the market recovery, when it happens, after streamlining its business during the downturn by cutting costs and jobs. It signaled its confidence by making a GBP108 million recommended bid for U.K.-based Spring Group PLC (SRG.LN.), a general recruitment company operating across the world, and said it was looking at more acquisitions.

"We expect business conditions to remain demanding," Chief Executive Patrick De Maeseneire said. "We were able to take out costs during the second quarter and pressure on the decline rates has eased over the course of the second quarter. But we really have to wait until September, after the summer break, to have a better view how the market develops."

The Zurich-based company reported a net loss for the three months to the end of June of EUR147 million, compared with the EUR212 million profit it made a year earlier when it was boosted by a tax gain. The result was well below analysts' forecasts for a net profit of EUR30 million as the company took a EUR125 million goodwill impairment charge on recent acquisitions such as DIS and Tuja in Germany.

Sales fell 31% to EUR3.59 billion, from EUR5.20 billion, as business in France, its biggest single market making up about 30% of revenue, continued to decline and demand for temporary employment services remained weak in the U.S., Germany and Japan.

Still, Adecco managed to boost its operating margin to 2.4%, from 2.1% in the first quarter, as it slashed costs to EUR2.95 billion, from EUR4.20 billion in the year-earlier period.

Adecco, like its rivals, has been hit hard by the economic downturn as businesses across the world have cut permanent and temporary jobs and unemployment is expected to rise further in both the U.S. and Europe in the months ahead.

Analysts expressed disappointment with Adecco's results and at 0808 GMT, the stock was down CHF0.85, or 1.6%, at CHF52, underperforming a rise in the broader Swiss market. The shares have risen more than 50% so far in 2009 amid hopes that the economy will improve faster than expected.

Bank Vontobel analyst Michael Foeth, who rates the stock at hold, commended Adecco's cost cutting efforts, describing them as remarkable in the current environment.

 
   Company Web Site:http://www.adecco.com 
 

-By Goran Mijuk, Dow Jones Newswires, +41 43 443 80 47; goran.mijuk@dowjones.com