Philips share price up as Q2 profit, sales beat projections

Royal Philips NV reported on Monday second-quarter profit and revenue that topped analysts expectations as a weaker euro helped boost sales.

The Dutch consumer, lighting and healthcare company said that group revenue soared little over 20% to €5.97 billion euros in the three months ended June 30th from €4.97 billion a year earlier, boosted by a weaker euro. Comparable sales, which exclude the impact of currency swings, were up 3%, partly due to improvements in North America, Central and Eastern Europe, and India.

Net profit rose 12.8% to €274 million from €243 million in the second quarter of 2014, Philips said, more than double the median estimate of €107 million in a Reuters poll.

Margin improvements at the companys healthcare division were largely offset by a strong dollar and investments, while operating margins at its consumer and lighting businesses improved following restructuring measures. Comparable sales in the healthcare division rose by 8% from a year earlier, while those at the consumer lifestyle business grew by 3% and lighting slid an annualized 3%.

In the so-called Growth Geographies, double-digit sales growth in Central and Eastern Europe and India was partly offset by a decline in China, Russia and Central Asia, the company said. Comparable equipment order intake at the healthcare business was down double-digit, mainly due to China and Latin America, which offset a double-digit growth in North America for an overall 4% decline for the quarter.

Philips CEO Frans van Houten said that although he is encouraged by the continuing improvements, the Amsterdam-based company was becoming increasingly concerned about the global economy, mainly due to a slowdown in China, Russia and Latin America. Still, Philips projected modest sales growth for the full year and “continued operational performance improvement in 2016.”

The company also reiterated its intentions to sell its more than a century-old lighting unit, the worlds biggest lighting maker, in the first half of 2016 through a sale or an initial public offering. Philips said it estimates the costs related to exiting the business to be in the range of €200 million to €300 million this year, compared to a previous estimate of €300 million to €400 million, and added it expects to book another €200 million to €300 million next year, including restructuring costs.

Koninklijke Philips NV traded 4.71% higher at €25.33 per share at 09:33 GMT in Amsterdam, marking a year-on-year increase of 7.33%. The company is valued at €23.04 billion. According to the Financial Times, the 20 analysts offering 12-month price targets for Koninklijke Philips NV have a median target of €26.00, with a high estimate of €34.00 and a low estimate of €20.00. The median estimate represents a 7.50% increase from the previous close of €24.19.