Profits down at Philips but it beats forecasts and looks to upturn

Updated: 03:56 EST, 13 July 2009

Dutch conglomerate Philips Electronics said it is hopeful of an upturn in business in the second half of 2009, helped by cost cuts, as it surprised the market with a return to profit in the second quarter.

Net profit was €45million (£39million), easily beating average forecasts of a €79million loss predicted by analysts as its healthcare division performed strongly.

The figure was boosted by €57million in insurance recoveries, which many in the market expected to be booked in the current quarter.

Analysts had forecast a loss for the electronics giant, but it turned £39m profit

'But excluding these items it was still better than expected due to healthcare,' said Petercam analyst Eric de Graaf.

The result also echoed early signs of recovery among Philips' rivals in the consumer electronics sector.

South Korea's Samsung Electronics last week forecast second-quarter earnings well above market estimates.

Philips posted a €396million profit in the second quarter of 2008 and a €74million loss in the first quarter of this year.

Philips said it was still cautious about the overall health of its markets but expected its comparative performance to be better in the second half of 2009 than in the first.

'On the same basis, there could be some sequential improvement in comparable sales as well,' Chief Executive Gerard Kleisterlee said in a statement.

'During the quarter we started to see positive impact of our strict cost management,' the CEO said, adding that he would not shy away from further cost reductions where needed.

The top-three hospital equipment maker and Europe's biggest consumer electronics producer has so far said it would cut 6,000 jobs this year, and nudged higher its initial projection of more than €500million in annual cost savings. 

'For next year on the back of all that has been announced so far that number should go to €600million,' CFO Pierre-Jean Sivignon told CNBC.