Oct 20, 2014
Dutch conglomerate Philips (PHG.AS) said it was pushing ahead with the planned spin off of its lighting business despite a net loss in the third quarter, when it was hit by weakness in Russia and China and a string of one-off charges.
On Monday, blaming dampened demand in key growth markets, Philips warned adjusted second-half earnings before interest, tax and amortization (EBITA) would be slightly below last year.
But the company added it expected improvements in 2015 and remained committed to its targets for 2016. It is also sticking to plans for the historic split announced last month, as it expands its higher-margin healthcare and consumer divisions.
"The market conditions do not affect us directly (as regards the spin-off)," said chief executive Frans van Houten.
In the third quarter, the company made a net loss of 103 million euros ($131 million) on sales of 5.5 billion euros. That compares with a net profit of 281 million euros on sales of 5.6 billion euros in the same period last year.
The company was hit by several one-off charges including a 366 million euro charge relating to a lost patent lawsuit against medical equipment manufacturer Masimo, which Philips is appealing.
There were also 49 million euros in mainly inventory writedowns, after an earlier production suspension at its Cleveland, Ohio, factory.
The weak bottom line and warnings for 2014 sent its shares down almost 4 percent by 4:30 a.m. EDT.
"We have headwinds from currency and we have these massive one-off incidents like this jury verdict in the United States on a patent litigation case and a one-off write-off relating to the Cleveland situation," van Houten told Reuters Insider.
"Barring all this, though, we are confident our operational result is improving. Currency headwinds are abating... We think 2015 will show much better results," he added.
The company, for decades a world-leading consumer electronics company, has reinvented itself in recent years, selling off its lower-margin television business in 2012.
It is now poised to take the dramatic step of splitting the lighting business, upon which the company was founded 123 years ago, off from the healthcare division, which makes hospital equipment and personal care products, with which it is targeting growth in emerging markets.
The separation process is expected to take 12 to 18 months, and van Houten said the spin-off was "likely" to happen via an initial public offering.
Source: REUTERS