LONDON--Dutch electronics maker Philips NV said Monday that net
profit fell 23% during the second quarter due to unfavorable
exchange rates and the suspension of its health care plant in
Cleveland, but said earnings should improve in the second half of
the year compared with the same period last year.
Net profit for the period ended June 30 was EUR242 million ($328
million), compared with EUR317 million a year earlier.
Sales fell 6% to EUR5.29 billion from EUR5.63 billion in the
second quarter of 2013. Stripping out currency effects, sales were
flat on an annual basis, with 7% growth at Philips's consumer
electronics business, 1% sales growth in the lighting business and
a 3% drop in sales at its health-care business.
The diversified-electronics manufacturer, whose products range
from kitchen appliances to hospital scanners, has been cutting
costs and divesting assets to focus on a handful of higher-margin
activities. It recently announced plans to spin off its lighting
components business and put the company's health-care unit, its
largest business, under the direct control of the company's Chief
Executive Frans Van Houten to instigate more rapid change amid
flagging sales.
Philips said the group's second-quarter earnings before
interest, taxes, and amortization or Ebita was EUR415 million,
slightly ahead of its recent guidance of around EUR400 million but
well below year-earlier earnings of EUR601 million due in part to
setbacks at its health-care business.
"In the second quarter we continued to face headwinds, including
ongoing softness in certain markets, unfavorable currency exchange
rates and the voluntary suspension of production at our health care
facility in Cleveland," said Mr. Van Houten.
Nevertheless, "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," he
said. He also reaffirmed that the company also remains committed to
meeting its 2016 financial targets.
Write to Alex MacDonald at alex.macdonald@wsj.com
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