Philips earnings rise despite recession

PHILIPS BEAT analysts’ consensus expectations for earnings by 17 per cent in the second quarter, after lifting sales in all its divisions despite the recession in Europe.

The results suggest the Dutch electronics group has turned a corner, a year after Frans van Houten, chief executive, launched a series of divestments and cost-cutting programmes to put the company on a stable footing.

Earnings before interest, taxes and amortisation rose 21 per cent year on year to €450 million, as revenues rose 15 per cent to €5.9 billion. Sales growth was led by a 7 per cent jump in revenues at Philips’ healthcare division, with the other two divisions – lighting and consumer living – also growing well.

Net profit came in at €167 million, compared with a €1.3 billion loss a year ago due to a goodwill impairment.

Mr van Houten said the company was “on the path to achieve our 2013 mid-term financial targets”, but warned the global economy had weakened in the past three months, particularly in Europe, which accounts for about 25 per cent of Philips’ revenues.

He chalked the results up to the companys cost-cutting and performance improvement programme.

The programme aims to realise €800 million in savings, with €400 million by the end of this year, by shortening the value chain and bringing about a “culture shift” within the company.

Philips has realised 40 per cent of the 4,500 job cuts announced as part of the cost-cutting. Mr van Houten said 60 of the company’s 200 most senior managers had been replaced in the past year, with half transferred within the company and half replaced by external candidates.

Shares closed more than 5 per cent higher at €17.03 on the Amsterdam stock exchange, which was 2 per cent lower.

Lighting sales growth at the world’s largest lighting manufacturer held up solidly, growing more than 6 per cent. In healthcare equipment, very rapid sales growth of 22 per cent in emerging markets outweighed declining sales in Europe and North ­America, which have been hurt by government austerity measures.

– (Copyright the Financial Times Limited 2012)