Philips (AMS:PHIA) Report Impressive Third-Quarter Profit

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Health technology business from the Netherlands, Philips NV (AMS:PHIA), has reported an impressive 18 percent growth in net income for the third quarter. The growth story beat the expectations of analysts.

Net income for the three months till September stands at 383 million euros or $416.19 million. In the same quarter last year, it was 324 million euros. Profitability has gone up by 14 percent before taxes, amortization, and interest. However, in Western Europe, comparative sales growth has gone up just by 2 percent. North America reports a meager 1 percent growth.

Overall, the 2016 outlook for this Amsterdam-based business remains the same. They are expecting “further earnings improvement” in the next quarter.

Philips NV Doing Well in Asia

Chief Executive, Frans van Houten, says that the 18 percent net income growth is on account of “fabulous” performance in the China market. Financial performance of the business was impressive in other Southeast Asian countries as well. “Emerging markets are growing well, but Europe remains a tough region”, Frans added.

Currently, less than 25 percent of Philip’s revenue comes from Europe. Van Houten agrees that “Europe revenue growth was not as strong”, because of heightened volatility.

Philips to Focus on Health Business

Health technology portfolio of the business has given Philips a decent 5 percent growth, but its traditional lighting segment has declined by 3 percent, which incidentally was spun off a few months back. But, they still have a 71 percent stake in the division. It was further revealed that the cost of separating the lighting business in the third quarter came to 24 million euros. In the last three months, the cost was 45 million. Philips plans to sell-off their entire stake in the lighting business gradually.

In the long-term Philips (AMS:PHIA) wants to emerge as solely a medtech company.

For instance, the lumileds components business will be sold off later in 2016. There was a deal earlier this year. But that was stalled because of regulatory issues. Philips had received an offer from a consortium of buyers from Asia in January. However, authorities in the United States did not allow the deal to go through.

They are currently looking for a buyer for the lumileds business. In fact, talks are already underway with Apollo Global Management, a private equity firm. But Frans has said that Philips has other plans if this deal doesn’t go through eventually.