Philips turnaround sees profits nearly triple
Focus on consumer appliances pays off
The Dutch firm, once known for its audio and video products, has shifted its focus towards the fast-growing healthcare equipment and energy-efficient lighting sectors.
Philips reported a near-tripling in third-quarter net profit, beating forecasts and pushing its shares to their highest since mid-2010 after two years of cutting costs, selling weak businesses and targeting new products at emerging markets.
The Dutch firm, once known for its audio and video products, has shifted its focus towards the fast-growing healthcare equipment and energy-efficient lighting sectors, bowing to competition as consumer entertainment evolved to mobile internet devices.
It has also launched a slew of products in the profitable consumer appliances market, selling electric toothbrushes and shavers in Japan and China and air purifiers in China and Singapore.
In the process Philips has boosted profits and, via a tight handle on costs, insulated itself from currency volatility and slowing economic growth that have recently rattled other big firms, like Unilever, present in India and Indonesia.
Philips has made €856 million in total gross savings to date as part of its overhead cost reduction plan, of which €183 million was realised in the third quarter.
Third-quarter net profit climbed to €281 million from €105 million a year ago, while sales rose 3 per cent on a comparable basis to €5.62 billion.
Chief executive Frans van Houten said Philips was committed to achieving its financial targets this year – sales growth between 4 and 6 per cent, a margin on earnings before interest, tax and amortisation of 10 to 12 per cent and a return on invested capital of 12 to 14 per cent.