New-look Philips lights up profits, buys back shares

Dutch group Philips, which has transformed itself away from some of its traditional businesses, reported an almost three-fold surge in third-quarter net profit on Monday.

The company also announced that later in the day it would begin to buy back its own shares under a programme totalling 1.5 billion euros ($2 billion).

Philips has experienced great difficulties in recent years and has responded with a restructuring which has involved reducing and refocusing its lighting, and phasing out its television businesses.

Chief executive Frans van Houten said in a statement that “this was another solid quarter for Philips, especially in light of the challenging global economic environment.”

The Eindhoven-based company specifically is a market leader in LED lighting technology. This business said grew by 33 per cent and now accounted for 30 per cent of its lighting sales.

Philips announced that it had been selected by Dubai’s municipality to install environmentally-friendly LED lighting systems, which it said would lead to a 50-per cent saving in energy.

In New Zealand, the company was installing a similar energy-efficient LED system in a brand of local fuel filling stations.

The group has diversified into medical equipment and healthcare which offer higher margins.

A highlight included a deal in with Singapore’s largest health and beauty chain to screen citizens across the Asian country for obstructive sleep apnea (OSA).

OSA is a sleeping disorder which causes breathing to stop for short periods at night and can lead to severe drowsiness during the day, among other symptoms.

The group’s traditional household appliances activities had come under strong pressure from competitors, notably in Asia.

However, the latest results showed that the part of the business which grew the fastest was the household appliance division where sales on a comparable basis surged by nine per cent, and mainly in emerging markets where sales rose by 10 per cent.

In Japan, Philips recently introduced an air-based fryer which cuts out the use of cooking oil, while in Latin America it launched an instant soup maker that combines a cooker and a blender in one.

Philips said earlier this year that an all-in-one male electronic shaver and kit was driving sales in North America and has now introduced the world’s first laser-guided beard trimmer.

Net group profit for the quarter was 282 million euros from 104 million euros in the same period last year, an increase of 171 per cent.

The improvement reflected a better operating outcome and reduced restructuring charges. Group sales fell by three per cent to 5.62 billion euros, but on a comparable asset base they rose by three per cent.

Philips, emerging from two years of radical restructuring, also said that in the third quarter it had reduced its costs by 183 million euros.

In April 2012 the group sold its troubled television branch to TPV technology, and in January this year it announced it was selling its entertainment business to long-term partner Funai.

The group employs slightly more than 114,000 people worldwide, or nearly 5,000 fewer than 12 months earlier.

The restructuring, called the “Accelerate!” programme, is intended to generate cost savings of 1.1 billion euros by the end of 2014, mainly be means of shedding a total of 6,700 jobs.