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updated: 1/29/2013 7:15 AM

Philips profit beats analyst estimates on health-care revenue

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  • Exterior view of the headquarters of Philips in Amsterdam, Netherlands.

      Exterior view of the headquarters of Philips in Amsterdam, Netherlands.
    Associated Press

 
Bloomberg News

Royal Philips Electronics NV, the world's largest lighting manufacturer, reported fourth-quarter profit that beat analysts' estimates, helped by demand for medical equipment and job cuts.

Earnings before interest, taxes, amortization and one-time items rose 50 percent to 875 million euros ($1.2 billion), the Amsterdam-based company said today in a statement. The estimate of analysts in a Bloomberg survey was for 866 million euros. Sales gained 6.7 percent to 7.16 billion euros.

Chief Executive Officer Frans van Houten is working through a companywide overhaul to save 1.1 billion euros that includes cutting 6,700 jobs and eliminating management layers to accelerate decision-making. The Philips veteran, now almost two years at the helm, is also moving the manufacturer into high- margin areas such as lighting products that save energy and health-and-wellness products, and away from a consumer- electronics past.

"Our operational results improved across all sectors, as a result of increased sales, overhead cost reductions, and gross margin expansion," Van Houten said in the statement today. "The challenging economic environment in 2012, notably in Europe and United States, has impacted our order book, and hence we expect our sales in 2013 to start slow and pick up in the second half of the year," he said, reiterating the company's full-year targets.

Lifestyle Deal

Philips also said today that it agreed to transfer ts Lifestyle Entertainment business, which includes DVD players, to Funai Electric Co., which will pay a cash consideration of 150 million euros and a brand license fee.

Philips competes with Siemens AG and General Electric Co. in health-care equipment such as medical scanners as well as in lighting. Philips third division, which makes consumer products, has shrunk over the years as customers flock to competitors such as Sony Corp. or Apple Inc. for mobile communications and music devices.

Siemens and GE posted quarterly results earlier this month that beat estimates, partly as a result of a rise in healthcare- orders with growth coming from emerging-markets such as China and stronger-than-expected orders in U.S.

Siemens CEO Peter Loescher said economic output in the euro zone will most probably decline again this year, while the economic recovery in the U.S. could pick up speed.

Siemens' shareholders last week approved plans to spin off the underperforming Osram lighting unit into a standalone company. Osram posted a profit of 79 million euros in the fiscal first quarter, compared with 111 million last year.

Philips said in December that reorganization charges at its lighting unit in the fourth quarter will amount to 215 million euros, exceeding forecasts by 48 percent, as it merges North American sales units and eliminates warehouses in Europe.

The measures are part of a worldwide overhaul that includes reducing the workforce and closing factories in response to falling industrywide demand for conventional lamps and the rise of light-emitting diodes. The Dutch company will drop some U.S. brands targeted at corporate customers.

--Editors: Simon Thiel, Andrew Noel

To contact the reporter on this story: Maaike Noordhuis in Amsterdam at mnoordhuisbloomberg.net

To contact the editor responsible for this story: Simon Thiel at sthiel1bloomberg.net

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