By Maarten van Tartwijk
AMSTERDAM--Royal Philips NV reported on Monday a 13% rise in
second-quarter net profit, but voiced growing concerns about an
economic slowdown in emerging markets.
The Amsterdam-based company, which makes everything from
hospital scanners, coffee machines and light bulbs, reported net
profit of EUR274 million ($301 million), up from EUR243 million in
the same period a year earlier. Sales rose 20% to EUR5.97 billion,
up from EUR4.97 billion a year ago.
The results beat analysts' expectations in part due to the
weaker euro against other global currencies, which provided a boost
to sales. The increase was also driven by cost-savings and improved
sales and margins at Philips' healthcare division, which accounts
for roughly 50% of group's profits.
Shares in Philips jumped up to 5% Monday morning, the biggest
riser in Amsterdam's AEX benchmark.
Chief Executive Frans van Houten, however, struck a cautious
tone for the rest of 2015, saying he was "increasingly concerned"
about the global economy because of recent weakness in China,
Russia and Latin America. Soft demand in these growth markets,
which account for roughly 35% of group sales, will result in
"modest sales growth" in 2015, he said.
China, Philips' second-largest market by sales, remains the
biggest source of concern. Last year, sales fell by nearly 11% to
EUR2.4 billion and Philips is struggling to stem the decline. The
company said its healthcare division recorded a double-digit
decline in orders, while the lighting division recorded a drop in
sales. This was only partially offset by high sales of Philips'
mother-and-child care products, such as baby bottles and breast
pumps.
The results came as Philips is preparing to exit its
124-year-old lighting business and focus on selling medical
equipment and consumer-electronics products. The company is moving
its lighting arm into a separate legal entity, clearing the way for
a possible initial public offering in the first half of 2016.
Mr. van Houten said he was encouraged by Philips' operational
performance and that the separation of the division will be less
costly than previously thought. Philips now expects separation
costs of EUR200 million to EUR300 million this year, lower than its
previous estimate of EUR300 million to EUR400 million.
Philips' healthcare division appears to have overcome problems
at a factory in Cleveland, which is gradually resuming production.
The facility, an important supplier of medical scanners, was shut
in 2014 after the Food and Drug Administration detected
shortcomings in manufacturing controls, prompting Philips to issue
a profit warning. Philips signaled that shipments may return to
normal levels by the end of the year.
Write to Maarten van Tartwijk at maarten.vantartwijk@wsj.com
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