Philips Q3 Profit Climbs, Despite Lower Sales; Warns On Sales Growth View

Philips PHG 102113

Dutch consumer electronics giant Koninklijke Philips Electronics NV (PHG, PHGFF) reported Monday a higher profit in its third quarter, boosted by improved performance in growth geographies. Sales, however, was hurt by negative currency effects. On a comparable basis, sales increased from last year.

Looking ahead, Chief Executive Officer Frans van Houten said, "We remain committed to reaching our financial targets this year. However, ongoing headwinds in the global economy are expected to continue to affect sales growth in the coming quarters."

Further, the company said that its new 1.5 billion euros share buy-back program, which was announced on September 17, starts today.

For the third quarter, Philips' net income climbed to 281 million euros from 105 million euros last year. Earnings per share grew to 0.31 euros from 0.11 euros a year earlier. On a continuing operations basis, net income grew to 270 million euros from 95 million euros last year.

Earnings before interest, tax and amortization or EBITA rose to 562 million euros from 366 million euros last year. EBITA margin improved to 10 percent from 6.3 percent a year earlier. EBITA excluding restructuring and other charges were 634 million or 11.3 percent of sales.

However, sales slipped 3 percent to 5.62 billion euros from 5.82 billion euros a year ago reflecting a 6 percent negative currency effect. Comparable sales growth was 3 percent.

In growth geographies, comparable sales increased 10 percent, while sales in mature geographies declined 1 percent, attributable to healthcare and lighting segments.

Healthcare segment's comparable sales remained flat, while currency-comparable equipment order intake declined 2 percent. In growth geographies, comparable sales increased by 3 percent, with strong growth in China, Central & Eastern Europe and Latin America.

Consumer Lifestyle segment's comparable sales increased 9 percent with growth in all businesses, driven by its focus on locally relevant products.

Lighting segment's comparable sales increased 3 percent, led by Lumileds, Automotive and Light Sources & Electronics. In the quarter, LED-based sales grew 33 percent.

Frans van Houten said, "This was another solid quarter for Philips, especially in light of the challenging global economic environment. I am pleased with the 33 percent increase in our operational results, clearly reflecting the continuing benefits of our Accelerate! Program.... Our strategic focus on value-accretive innovations and new business models is resulting in encouraging successes across our markets."

Philips in September had said that the company sees a comparable sales growth of 4 to 6 percent on a compound annual growth rate basis for 2014-16. According to Philips, its 2011-13 comparable sales CAGR is progressing towards the range of 4 to 6 percent, even as global GDP is below 3 percent. The company's reported EBITA margin target for 2016 is estimated to be 11 to 12 percent.

In Amsterdam, Philips shares closed Friday's trading at 24.42 euros, up 0.32 euros or 1.33 percent.

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