--Philips raises net profit helped by gains from divestments
--Philips raises sales by 4% on a comparable basis
--Philips healthcare unit order intake up by 7%
--Results beat expectations, shares soar
By Archibald Preuschat
Of DOW JONES NEWSWIRES
AMSTERDAM -(Dow Jones)- Dutch electronics giant Royal Philips Electronics (PHIA.AE) Monday delivered a healthy net profit helped by strong sales and gains from asset sales, sending its shares briskly higher.
Philips' healthcare operations, which makes equipment like medical scanners, performed strongly, and there was some light at the end of the tunnel for its sluggish lighting business.
At 0926 GMT, the stock was trading 4.8% higher at EUR15.03, while the wider blue-chip AEX index was 2.3% lower.
"I am encouraged by our results in the first quarter, which is a further step in the right direction for Philips on our path to value to achieve the mid-term 2013 financial targets," Chief Executive Frans van Houten said in a statement.
After taking the helm at Philips a year ago, van Houten is keen to make the company leaner and more customer focussed. By 2013, he aims to achieve sales growth of between 4% and 6% and Ebita margin of 10% to 12%.
The CEO cautioned, however, about the remainder of 2012, citing the uncertainties in Europe, particularly in the healthcare sector and in construction markets, which affects its home and business lighting operations, and he reiterated that restructuring costs will weigh on the company's results this year.
Philips competes with General Electric Co. (GE) and Siemens AG (SIE.XE) in healthcare equipment and with the latter also in lighting. It has struggled to maintain growth over past quarters as the European economic slowdown and austerity measures pinched government and consumer spending.
The company delivered a net profit of EUR248 million for the first three months of the year, up more than 80% from EUR137 million in the same period last year. In the final quarter of 2011 it had posted EUR162 million net loss blmaing weak markets and losses from its TV business.
Closely watched earnings before interest, taxes and amortization, or Ebita, rose to EUR552 million from EUR438 million in the year-ago quarter, fueled by a EUR37 million gain from the sale of High Tech Campus, a technology center Philips started in Eindhoven, Netherlands and by EUR160 million gain from selling half of Senseo, the trade mark behind its Senseo coffee machines to U.S. company Sara Lee Corp. (SLE).
The gains boosted Ebita profit margin to 9.8% from 8.3% a year earlier. Without the gains the Ebita margin would have slipped by 100 basis points to 7.6%. Sales were up 7% at EUR5.61 billion.
In a note to investors Kepler Capital Markets said the results were encouraging.
"Following several quarters of disappointing results we are pleased to see some signs of improvements" which might be "a first step in restoring investor confidence" in Philips' targets, the brokerage said. It rates the stock at "buy" with an EUR20 price target.
Philips clearly beat the market's expectations, even when stripping out one-time gains, ING analyst Sjoerd Ummels noted.
The company's biggest healthcare unit, which contributes almost 40% to overall sales, achieved 9% sales growth on a comparable basis and a 7% increase in equipment order intake, driven by emerging markets and to a smaller extent the North American market. But even in Europe, where government cutbacks have taken a toll, order intake declined by just 1% in the quarter, compared with a 14% fall in the prior quarter. Some delayed orders finally came through, Philips' management said in a conference call.
In lighting, its second-largest business, which has struggled to maintain profits through the downturn, Ebita, adjusted for charges, rose quarter on quarter, after seven quarters of sequential decline.
"It's too early to cry victory," CEO van Houten said, but noted that the measures taken are having an effect.
In the consumer lifestyle business that makes a wide range of products from DVD players to shavers, sales fell 1% as growth in domestic appliances and personal care was offset by declining sales in lifestyle entertainment, like headphones.
In a bid to stem its losses, Philips plans to cut 4,500 jobs globally, 1,400 of them in the Netherlands. Along with other cuts it aims to deliver savings of EUR800 million by 2014.
Van Houten reiterated that he expects profits to improve in the second half of the year.
-By Archibald Preuschat, Dow Jones Newswires; +31 20 5715 218; email@example.com
(END) Dow Jones Newswires
April 23, 2012 06:59 ET (10:59 GMT)
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