Koninklijke Phillips Electronics N.V.
) reported net income of €281 million ($372.2 million) in the
third quarter of 2013, up 167.6% year over year. The
year-over-year growth was primarily due to overall improvement in
operating results and lower restructuring and acquisition related
charges. In addition, project Accelerate has also been a driving
factor for the robust increase in income.
Phillips reported third quarter earnings of €0.31 (41 cents),
a strong 181.8% year-over-year increase.
Following the earnings release on Oct 21, the stock grew 1.4%
to $35.65 on Oct
Third quarter sales on a comparable basis grew 3% year over
year to €5.6 billion ($7.4 billion). However, group nominal sales
declined 3% year over year due to 6% impact from unfavorable
Earnings before Interest, Tax and Amortization (EBITA),
excluding restructuring and acquisition related charges, the
pension settlement loss, and the loss on the sale of industrial
assets at Lighting, stood at €634 million ($840 million) or 11.3%
of sales versus 8.2% in the prior-year quarter. Increase in
adjusted EBITA was also driven by improved gross margin and cost
improvements across all sectors.
for the quarter were flat year over year on comparable basis at
€2.36 billion ($3.13 billion) owing to weakness in some of its
businesses. Customer services grew in mid-single digits, while
Patient Care & Clinical Informatics and Home Healthcare
Solutions increased in low-single digits. In addition, Imaging
systems also reported a mid-single digit decline.
Geographically, revenues on comparable basis in growth
geographies grew 3% year over year with particularly strong
growth in China, Central & Eastern Europe and Latin America.
This was partially offset by weakness in Russia, Central Asia,
the Middle East and Turkey. However, Western Europe was flat year
over year, while North America witnessed a 2% decline and other
mature geographies reported low single digit growth.
Orders in the Healthcare equipment on a comparable basis
declined 2% year over year in the reported quarter as orders in
the Imaging systems grew in low single digit, which was fully
offset by 7% decline in both Patient care and Clinical
segment posted strong revenue growth of 9% to €1.1 billion ($1.4
billion) in the quarter on a comparable basis. During the
quarter, the segment reported high double-digit growth in Health
& Wellness and domestic appliances reported high single-digit
growth. Personal Care division also grew in mid single-digits
during the quarter.
On geographical basis, Phillips has been strengthening its
Consumer Lifestyle division's presence by introducing innovative
products. During the quarter, the segment reported strong
double-digit growth in growth geographies and mid single-digit
growth in mature geographies. While North America reported high
single-digit growth, Western Europe remained flat year over year.
During the reported quarter, the
reported sales increase of 3.0% year over year on comparable
basis. Segment revenues were driven by double-digit growth at
Lumileds and Automotive. In addition, Light sources and
Electronics achieved low single-digit growth, partially offset by
Professional Lightning Solutions and Consumer Luminaires reported
low single-digit decline. LED sales grew 33% year over year and
now represent 30% of the total lighting sales.
Revenues in the
Innovation, Group & Services
segment declined 1.6% to €185 million ($245 million), primarily
due to lower license income.
On a geographical basis, comparable sales in the growth
geographies increased 10% in the third quarter. The increase was
driven by strong growth in China, the Middle East and Turkey.
Growth geographies represented 37% of total sales in the quarter
versus 35% in the third 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 and revenues declined 1% year over year in these markets.
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
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 a €856
million ($1.1 million) in gross savings and has been able to
reduce about 66% of the targeted employees during the third
quarter. This program is expected to be complete by 2014.
Cash, Balance Sheet and Share Repurchase
Cash flow from operating activities declined to €337 million
($446 million) compared with €648 million in the comparable
prior-year quarter. The decrease was attributable to debt
redemption and expenses related to discontinued operations.
Capital expenditures for the quarter were €220 ($291 million)
versus €238 million in the year-ago period, due to lower
investments in the Lighting and Consumer Lifestyle segments.
At the end of the third quarter, the company had a debt of
€2.0 billion ($2.6 billion) compared to €1.5 billion in the
prior-year quarter. The decline in debt was attributable to
payment of €72 million ($95 million) of debt during the
During the third quarter, Phillips initiated a share buyback
program worth €1.5 billion ($1.99 billion), beginning Oct 21.
Phillips currently has a Zacks Rank #3 (Hold). Other stocks
that are worth considering at the moment are
Bel Fuse Inc
Mistras Group, Inc.
). All three carry a Zacks Rank #2 (Buy).
1€ = $1.32470 (3 months average, ending Sep 30)
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