Philips expects core profit to rise due to cost-cutting measures

Monday 21 July 2014 10.11
Philips reported a net profit of €243m in its second quarter
Philips reported a net profit of €243m in its second quarter

Philips said it expects its core profit to rise in the second half of the year after cost-cutting measures, but 2014 would still be challenging.

As a result of cost-cutting, the Dutch healthcare, lighting and consumer appliances group reported second-quarter earnings before interest, tax and amortization of €415m and net profit of €243m on sales of €5.3bn.

Analysts in a poll commissioned by Reuters had forecast net profit of €164m and EBITA of €400m on sales of €5.4bn.

"While 2014 is expected to be a challenging year overall, we anticipate EBITA for the group, excluding restructuring and acquisition-related charges and other items, in the second half of the year to exceed the level of the same period last year," the company said in a statement.

In April Philips Chief Executive Frans van Houten said that improving the overall result in 2014 would be difficult.

Earlier this month Philips said its second-quarter EBITA would be in line with forecasts at about €400m, while warning its healthcare business would disappoint. 

"In the second quarter we continued to face headwinds, including ongoing softness in certain markets, unfavourable currency exchange rates and the voluntary suspension of production at our health care facility in Cleveland," Van Houten said in a statement.

Philips is in the process of transforming from a consumer electronics company into a high-end medical systems and lighting company. Last month it announced plans to spin off its lighting components manufacturing business to concentrate on providing higher-value services and lighting.