Lighter sales and health cuts take shine off shares in Philips

City A.M. Reporter
PHILIPS yesterday forecast a slow first half of the year due to a weak European economy and a tough outlook for healthcare spending in the United States, sending its shares to a four-month low.

The Dutch company reported better-than-expected quarterly profit of €162m (£138.5m) but weaker sales, underscoring the challenges it faces as it restructures to cope with stagnant economic growth, fragile consumer spending and government budget cuts in several markets.

Quarterly sales rose one per cent on a comparable basis to €5.26bn, slightly short of forecasts.

Shares in Philips, the world’s biggest lighting maker and a top-three maker of hospital equipment, fell to their lowest level since January, down 5.22 per cent at €20.53 yesterday.

Philips has sold off much of its consumer electronics business to improve profitability.

Chief executive Frans van Houten, who has driven Philips’ restructuring over the past two years, said the outlook for healthcare is particularly tough in the United States, where executives in the sector are cautious about spending plans ahead of healthcare reforms.

Philips said it was on track to achieve its end-2013 targets of sales growth of between four and six per cent, a margin on Ebita of 10 to 12 per cent, and a return on invested capital of 12 to 14 per cent.

Van Houten said he would give an update on new financial targets for coming years on 17 September.