Koninklijke Phillips Electronics N.V.
) 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
Phillips' second quarter 2013 earnings per share soared 218.2%
year over year to €0.35 (45
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
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
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.
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
During the reported quarter, the
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
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
Phillips currently has a Zacks Rank #2 (Buy). Other stocks
worth considering at the moment are
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