Philips Intensifies Focus on LED Lighting; Creates Stand-Alone Company

Philips Intensifies Focus on LED Lighting; Creates Stand-Alone Company

Koninklijke Philips NV (ADR) (NYSE:PHG) (AMS:PHIA) reported its second-quarter financial results today. The Dutch company indicated that it continued to face challenges such as ongoing weakness in certain markets, but it is taking measures to boost its performance such as transforming its lighting business.

Financial results

During the second-quarter, Koninklijke Philips NV (ADR) (NYSE:PHG) (AMS:PHIA) reported €5.3 billion on total sales and € 415 million in EBITA. According to the company, its excluding restructuring and acquisition-related charges and other items, its EBITA should have been € 415 million or 8.5% of sales.

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Koninklijke Philips NV (ADR) (NYSE:PHG) (AMS:PHIA) said its net income was €243 million, and free cash flow was €261 million, higher than its € 105 million free cash flow in the same period last year.

In a statement, Frans van Houten, CEO of Koninklijke Philips NV (ADR) (NYSE:PHG) (AMS:PHIA) said, “In the second quarter, we continued to face headwinds, including ongoing softness in certain market, unfavorable currency exchange rates, and the voluntary suspension of production at our health facility in Cleveland.”

Houten added that the management of Koninklijke Philips NV (ADR) (NYSE:PHG) (AMS:PHIA) is implementing decisive actions to speed up value creation, improve performance and capitalize the company’s higher growth opportunities.”

Philips to create a stand-alone company

Houten emphasized that the decision to create a stand-alone company composed of Lumileds (LED components) and Automotive lighting businesses within Koninklijke Philips NV (ADR) (NYSE:PHG) (AMS:PHIA) demonstrates their commitment to improve its financial performance. The company also aims to restructure the management of its healthcare business.

Lighting business

Koninklijke Philips NV (ADR) (NYSE:PHG) (AMS:PHIA) said it was intensifying its focus in connected LED lighting systems and services, LE luminaires and LED lamps for the professional and consumer markets.
The Dutch company explained that the decision to combine its Lumileds and Automotive lighting business as a stand-alone company will extend its leading portfolio of digital lighting components. The company also believes that it will achieve robust growth, and will be able to serve more customers in the industry.

Furthermore, Koninklijke Philips NV (ADR) (NYSE:PHG) (AMS:PHIA) said it is taking advantage if the many growing opportunities in the growing LED space due to the increasing demand for energy efficiency and digital controls. The company emphasized that it is making progress in professional lighting solutions in North America, and it is anticipating an improvement in the third-quarter and a return to profitability in the second-half of this year.

Koninklijke Philips NV (ADR) (NYSE:PHG) (AMS:PHIA) said its LED-based sales increased 43% during the second quarter, which accounts 36% of total lighting sales. According to the company, its sales in conventional lighting declined 13% during the period.

Healthcare business

According to Houten, its healthcare business continued to win large-scale multi-year partnerships such as recently announced agreement with New Karolinska Hospital in Solna, Sweden. He also noted that the company’s strategic alliance with, inc. (NYSE:CRM) allows its rapid launching of new clinical applications for home care and care coordination.

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