Cuts pay off for Philips as sales beat forecasts

PHILIPS Electronics surpassed expectations yesterday by posting a five per cent sales rise and a €167m (£130m) net profit, in a sign that the manufacturer’s aggressive cost-cutting and restructuring operation is reaping rewards.

The Dutch firm’s €5.9bn revenue in the three months to July was driven by strong performances in its healthcare and lighting divisions.

Chief executive Frans van Houten said Philips is looking at “various models” for its consumer electronics arm, which has struggled to compete with cheaper Asian imports.

“There is no denying that the global economy is weaker now than it was just three months ago, especially in Europe,” van Houten said. Philips’ sales in Europe and North America have dipped, although demand in emerging markets has risen and now makes up 35 per cent of its revenue.

The world’s largest lighting manufacturer reported six per cent growth in its lighting division, and a seven per cent increase in healthcare sales. Profits were stronger than expected, following a €1.3bn loss in the same period last year.

Shares in the company rose by more than four per cent on yesterday’s news, with earnings 17 per cent better than analysts had predicted.

Since van Houten took charge of Philips in 2010, the firm has embarked on an €800m cost-saving programme including cutting 4,500 jobs and selling its struggling TV division. Van Houten said the “relentless execution” of its spending cuts enabled Philips “to continue on the path to achieve our 2013 mid-term financial targets”.

ING analyst Sjoerd Ummels called the results “very strong.”