Dutch conglomerate Philips Electronics signaled brighter business prospects for the second half of 2009, helped by cost cuts, as it surprised the market with a return to profit in the second quarter.
Though still cautious about the overall picture, Philips said on Monday it expected an improved performance in the rest of this year as some of its markets, notably in emerging economies, may be bottoming out.
There could be some sequential improvement in comparable sales as well, Chief Executive Gerard Kleisterlee said in a statement.
CFO Pierre-Jean Sivignon told reporters that early signs of recovery could be seen in some parts of the consumer electronics and lighting businesses, while healthcare in the United States showed no further deterioration during the second quarter.
The comments by the firm - the world's biggest lighting manufacturer and Europe's No. 1 for consumer electronics - echoed early signs of recovery among rivals. South Korea's Samsung Electronics <005930.KS> last week forecast second-quarter earnings well above market estimates.
Philips shares were up 4.5 percent at 13.53 euros by 0854 GMT, the top gainer in the DJ Stoxx 50 index <.STOXX50>, which was down 0.25 percent.
With an outlook of ongoing cost cutting, but also the first signs of stabilization, and maybe even a cautious improvement, the first rays of light are becoming visible, Petercam analyst Eric de Graaf said.
IMPACT OF COST CUTS
Philips' second quarter earnings before interest, taxes and amortization (EBITA) were 118 million euros ($164.4 million), easily beating average forecasts of a 79 million euro loss from a Reuters poll of 23 analysts as the healthcare division performed notably well.
The Healthcare unit, which competes against General Electric Co and Siemens AG , posted EBITA of 158 million euros, where analysts had expected 96 million euros. with individual estimates ranging from 60 million to 135 million.
Group earnings were boosted by 57 million euros in insurance recoveries, which many in the market expected to be booked in the current quarter, and a 33 million legal settlement.
Philips posted a 396 million euro profit at EBITDA level in the second quarter of 2008 and a 74 million loss in the first quarter of this year.
During the (latest) 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.
Philips has so far said it would cut 6,000 jobs this year, and nudged higher its initial projection of more than 500 million euros in annual cost savings.
For next year on the back of all that has been announced so far that number should go to 600 million euros, Sivignon said.
(Reporting by Harro ten Wolde; Editing by Mike Nesbit, John Stonestreet)