Issue link: https://read.dmtmag.com/i/490948
I DA U N I V E R S A L M a rc h -A p r i l 2 0 1 5 25 igns of a long- awaited recovery in Europe are starting to show through in the profi ts of leading global companies, even if their bosses are still giving most of the credit to strong demand in Asia or the United States. Reuters has analyzed comments from more than 50 of the biggest companies selling in Europe, which in recent weeks have mostly reported improving global earnings. In investor presen- tations and analyst calls, 71 percent said they enjoyed a swing from contraction to growth in Europe last year, or experienced a pickup in growth. Only 16 percent said European performance deteriorated in 2014 or that they expected declines in 2015. irteen percent said they saw stagnant markets for their goods and services in the region this year. "European markets recov- ered beyond our expectations," Carlos Ghosn, CEO of Renault SA, told investors earlier this month, saying the continent was the main driver of the carmaker's increased sales. Executives said they expected the positive momentum to be sustained through the year, as lower oil prices feed through into consumer's pockets and the European Central Bank prints new money to buy government bonds. Analysts say investors haven't fully factored in the extent to which the European Union – whose year-on-year GDP growth of just 1.3 percent in the last quarter of 2014 was around half the U.S. level -- has begun to turn the corner. "It's something that is still below the radar of global investors who have deserted Europe during the last few years and remain skeptical about the earnings trend in Europe," said Benoit Peloille, equity strategist at French corporate and investment bank Natixis. " ere is improvement in the macro landscape in Europe, and companies are starting to benefi t from it," he added. Northern European countries, like Britain and Germany, were typically cited as the strongest markets, but many companies said a recovery in southern Europe was tipping the continent into positive territory. L'Oreal Finance Director Christian Mulliez said that in Europe, the cosmetics group had seen "the strongest growth since 2007, thanks mainly to the turnaround in Southern Europe." e company said Sp ain, Portugal and Greece had displayed good growth, while other fi rms also cited recovery in Italy. In their earnings reports for the fourth quarter of 2014, 58 percent of members of the STOXX 600 index of leading European companies said their profi ts had increased, although that data also refl ects their operations outside Europe. Overall, fourth-quarter earnings are expected to grow by 19.5 percent, which would be Europe's best earnings season in 3-1/2 years. European equities saw their largest ever infl ows last week, totaling $5.8 billion. WEAK CURRENCY HELPS Stronger demand was the key driver of improved performance in Europe, executives said. is, and the tough cost-cutting introduced in recent years to tackle the so economy, allowed many companies to boost margins, even against a defl ationary backdrop. "List price increases are diffi cult to accomplish. But you saw in Europe a terrifi c margin expansion this year," Ian Cook, chief executive of Colgate-Palmolive Co., told investors last month, citing Below the Radar, Growth in Europe Starts Swelling Company Profi ts S Continued on page 27