Koninklijke Phillips Electronics N.V. (PHG) reported a net income of €317 million ($413.9 million) in the second quarter of 2013, up 210.8% year over year. The year-over-year growth was primarily driven by a 30% improvement in operating results and lower restructuring and acquisition related charges. In addition, project Accelerate also boosted the company’s income.
Phillips’ second quarter 2013 earnings per share soared 218.2% year over year to €0.35 (45 cents).
Comparable sales grew 3% year over year to €5.65 billion ($7.38 billion) in the second quarter of 2013. However, group nominal sales grew 2% year over year due to a 1% impact from unfavorable currency translations.
Earnings before Interest, Tax and Amortization (:EBITA), excluding one-time items, stood at €603 million ($784.5 million) or 10.7% of sales, versus €339 million or 6.1% of sales in the prior-year quarter. However, excluding the acquisitions and restructuring charges, the company reported EBITA of €530 million ($692 million) or 9.4% of sales compared with €408 million or 7.3% of sales in the year-ago quarter. This reflects a 30% year-over-year increase driven by gross margin improvement across its sectors.
Healthcare sales in the quarter were flat year over year on comparable basis at €2.36 billion ($3.08 billion) owing to the weakness in some of its businesses. Customer services grew by mid-single digit, while Patient Care & Clinical Informatics and Home Healthcare Solutions increased in low-single digit. This was offset by a high-single digit decline in sales in Imaging systems.
Geographically, revenues in North America increased in mid-single digit, while sales in Europe declined in low-single digit. However, this was offset by 19% increase in growth geographies.
Orders in the Healthcare equipment segment grew 7% year over year in the reported quarter as orders in Patient care and Clinical Informatics increased in double digits and orders in the Imaging systems grew in single digit.
The Consumer Lifestyle segment posted robust revenue growth of 13% to €82 million ($107 million) on a comparable basis. The segment reported double-digit growth at Domestic Appliances and Personal Care and posted mid-single-digit growth at Health & Wellness. This is the fourth consecutive quarter of double-digit sales growth for the segment.
During the reported quarter, the Lightning segment reported sales increase of 2.0% year over year on comparable basis. High-single-digit growth at Automotives, mid-single-digit growth at Lumileds and Consumer Luminaires and low-single-digit growth in Lights & Electronics was partially offset by lower sales in the Professional Lightning solutions. LED sales grew 28% year over year and accounted for 25% of the total lighting sales.
Revenues in the Innovation, Group & Services segment declined 5.8% to €161 million ($210 million), primarily due to lower license income.
On a geographical basis, comparable sales in the growth geographies increased 12% in the second quarter. The increase was driven by strong growth in China, Latin America and Russia. Growth geographies represented 37% of total sales in the quarter versus 34% in the second quarter of 2012.
The company’s growth markets exclude the U.S, Canada, Western Europe, Australia, New Zealand, South Korea and Japan.
The above mentioned geographies are classified as mature markets where revenues declined 2% year over year. The marginal decline in the mature markets was primarily attributable to weak sales in the Lightning and healthcare segment, which was partially offset by growth at Consumer Lifestyle.
Phillips introduced project Accelerate to improve its overall performance and reduce costs for the company. The project is expected to be operational till 2017 and has five streams to enhance customer relevance, change company culture, reduce overhead costs, streamline the End2End customer value chains, and re-allocate resources to profitable growth opportunities.
In addition, the company has also introduced a €1.1 billion cost reduction program. To date, the company has achieved €202 million ($263 million) in gross savings and has been able to reduce about 84% of the targeted 6,700 employees. This program is expected to complete by 2014.
Cash and Balance Sheet
Cash flow from operating activities grew significantly to €124 million ($162 million) compared to €81 million in the prior-year quarter. The increase was attributable to higher net earnings.
Capital expenditures for the quarter were €145 ($150 million) versus €168 million in the year-ago period, due to lower investments in the Lighting and Consumer Lifestyle segments.
At the end of the first quarter, the company had a debt of €2.1 billion ($2.7 billion) compared to €1.8 billion in the prior-year quarter. The increase in debt was attributable to treasury share transactions and distribution of annual dividend.Read the Full Research Report on PHG
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