Philips Shares Rally on Earnings
Dutch electronics firm says its operational performance continued to improve
Shares in Royal Philips NV rallied Tuesday after the Dutch electronics company reported earnings that beat market expectations, giving investors some comfort ahead of the planned sale of its lighting business.
Philips said adjusted earnings before interest and taxes, its preferred measure of its operational performance, rose 13% to €842 million ($911 million) in the three months ended Dec. 31. Total sales rose 9% to €7.1 billion in the period, and by 2% on a constant currency basis, despite what the company called “challenging macroeconomic circumstances.”
Analysts said they were impressed by the performance of all Philips’ divisions, and its shares rose 6.5% in Amsterdam.
Philips is in the midst of separating its nearly 125-years-old lighting business, for which it is exploring either a sale or an initial public offering in the next couple of months.
The plan is part of wider strategic overhaullaunched by Chief Executive Frans van Houten to concentrate Philips on its more profitable and faster growing healthcare-technology business, where it competes with Siemens AG and General Electric Co.
The health care unit recorded sales of €3.3 billion in the fourth quarter, up 3% on a constant currency basis. The division saw order intake rise by 15% at constant currencies, driven by strong demand in North America, Western Europe and China.
The lighting division reported sales of €2 billion, down 2% on a constant-currency basis, reflecting the continued decline in sales of incandescent lightbulbs. The unit, however, posted a 19% rise in adjusted operating profit, in part due to cost-savings and strong sales of light-emitting diode, or LED, lamps.
ING analyst Marc Zwartsenburg said the strong results at the lighting division were “especially welcome in light of a potential sale of IPO.”
U.K. industrial firm Melrose Industries PLC and a number of private-equity firm are considering a bid for the unit, which could be valued as high as €6 billion, people familiar with the matter told The Wall Street Journal this month.
Mr. van Houten confirmed multiple parties have shown interest, but declined to make further comment.
He also said Philips has started the search for a new buyer for its LED-components business, Lumileds, after a $2.8 deal with a Chinese investor was blocked on national-security grounds by the Committee on Foreign Investment in the U.S.
A new deal is expected to be closed in the second half of this year, but likely at a lower price. “The [previous] deal was very attractive and may not be repeatable,” Mr. van Houten said.
Philips reported a net loss of €39 million in the fourth quarter, compared with a net profit of €134 million in the corresponding period a year earlier, which was largely the result of one-time pension charges and higher taxes.
The company said it proposes to pay a dividend of €0.80 a share for 2015, unchanged from the previous year.
Source: WSJ – Philips Shares Rally on Earnings
