Philips Second-Quarter Profit Beats Expectations as 2016 Outlook Unchanged

CEO Frans van Houten said the company is sticking to its outlook for the year amid volatility in a number of markets.
By Renee Cordes ,

Royal Philips (PHG) - Get Report left its earnings outlook for the year unchanged after posting second-quarter profit that came in better than expected.

The company said that adjusted Ebita in the second quarter rose to €544 million ($569.39 million), or 9.3% of sales, in the second quarter from €501 million, or 8.4% of sales, a year earlier.

The €544 million exceeded the €519 million projected in a Bloomberg News poll.

Comparable sales growth of 3% was driven by double-digit growth in health and wellness and high single-digit growth in personal care, sleep and respiratory care and domestic appliances, the company said.

Broken down by geography, double-digit growth in Central and Eastern Europe and the Middle East and Turkey, and in Western Europe, overshadowed low single-digit growth China and high single-digit growth in North America.

The company spun off Philips Lighting earlier this year in an IPO to boost its focus on health care, in which it retains a majority stake that it plans to sell down over the next several years. Costs related to the separation amounted to €45 million in the second quarter, with further separate costs in the second half expected to be in the range of €65 million to €85 million.

Another €38 million of costs related to the listing of Philips Lighting were booked through equity in the second quarter.

A 5% comparable sales growth in healthtech offset a 1% decline in Lighting. 

Philips CEO Frans van Houten said in a statement that the company is sticking to its guidance for 2016, "as we continue to expect earnings improvements in the second half of the year, but we are convinced about increased risk due to volatility in a number of markets."

During a conference call he said the company remains "absolutely committed" to selling its combined Lumileds and automotive lighting components division, in the second half of the year and is in dialog with "various parties." The company had to go back to square one after U.S. regulators blocked at $3 billion sale to a consortium led by GO Scale Capital of China.

Philips shares were up 1.09% at €24.05 in late morning trading on the Amsterdam Euronext exchange, for a market value of just below €22.7 billion.

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