Philips shares soar as revamp plan pays off

PHILIPS reported a near-tripling in third-quarter net profit yesterday, beating forecasts and pushing its shares to their highest since mid-2010 after two years of cutting costs, selling weak businesses and targeting new products at emerging markets.

The Dutch firm, once known for its audio and video products, has shifted its focus towards the fast-growing healthcare equipment and energy-efficient lighting sectors, bowing to competition from a plethora of Asian companies as consumer entertainment evolved to mobile internet devices.

Third-quarter net profit climbed to €281m (£238m) from €105m a year ago, while sales rose three per cent on a comparable basis to €5.62bn.

Philips has made €856m in total gross savings to date as part of its overhead cost reduction plan, of which €183m was realised in the third quarter.

Chief executive Frans Van Houten said Philips was committed to achieving its financial targets this year of sales growth between four and six per cent, a margin on earnings before interest, tax and amortisation (Ebita) of 10 to 12 per cent and a return on invested capital of 12 to 14 per cent.

But he warned the company was still at risk from turbulence in the United States over healthcare reforms because of the impact this has on hospitals placing orders for medical equipment.

Ebit for the consumer business rose nearly 50 per cent to €116m in the third quarter, from €78m a year ago, while for the lighting division, ebita surged more than five times to €177m, from €32m.

Shares jumped more than five per cent to hit €25.73, the highest level since mid-2010.