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Philips Q1 beats expectations

Dutch Philips Electronics reported first-quarter operating profit above the most optimistic forecast, driven by its lighting unit and cost cuts, sending shares to a 23-month high.

Philips, a bellwether for the technology sector, said on Monday that earnings before interest, taxes and amortization (EBITA) rose to €504 million from a €74 million loss a year ago.

That was well above the average forecast of €294 million and the top estimate of €383 million in a Reuters poll of 19 analysts.

“(These are) cast-iron results in their best-ever first quarter in terms of profitability,” Theodoor Gilissen analyst Jos Versteeg said.

Philips, whose products range from MP3 players and digital photo frames to MRI scanners, toasters and shavers, competes with the healthcare and lighting units of General Electric and Germany's Siemens, among others.

On Friday, General Electric beat analysts' expectations and reported strong results at its healthcare unit.

Philips said the outlook for the second half of the year remained uncertain, even though first-quarter sales momentum was expected to continue in the second quarter.

Chief Executive Gerard Kleisterlee said in a statement that “economic uncertainty remains high and consumer confidence low.”

First-quarter revenue rose 12% to €5.7 billion, while net profit was €201 million, up from a €57 million loss in the same period last year.

SNS Securities analyst Victor Bareno said the results were “stellar” and kept the shares on “buy.”

Philips said it was increasingly confident of delivering an EBITA margin, excluding exceptional items, of 10% as early as this year, nearing its original 10%-11% margin target, which was abandoned in 2008 due to the recession.

That outlook is based on the developments during the first quarter as well as on its guidance for more than €700 million in cost savings. “But we are always looking for more,” Chief Financial Officer Pierre-Jean Sivignon said.

Sivignon told Reuters Insider that Philips had no intention to up its almost 20% stake in Dutch chip producer NXP, which has filed a registration statement with the Securities and Exchange Commission in the United States for a potential initial public offering of its shares.

“We are still a passive investor (in NXP),” Sivignon said. “We will see how that goes,” he said referring to the IPO, which could raise up to $1.15 billion.

Philips said European sales growth was driven by its lighting unit, largely due to restocking, and the healthcare unit, while the North American consumer lifestyle business was also a significant driver. In Philips' emerging markets, such as China, India, Brazil and Russia, lighting was the main driver of double-digit growth.

Consumer Lifestyle Executive Andrea Ragnetti said he would leave the company, ruling him out as a candidate to succeed CEO Keisterlee, who will retire next year.

Philips has said it will make an announcement on Kleisterlee's replacement in the early second half of this year. (Reuters)