The group, which spun off its lighting division last year to focus on medical devices and healthcare products, cautioned that markets globally remained volatile and its overall outlook for 2017 was unchanged. In Western Europe, it reported an 8 percent rise in second-quarter sales but a 10 percent drop in orders, but investors were encouraged by its performance in the United States, which contributes more than a third of group revenue.
US sales grew 4 percent in the first quarter from a year earlier, the fastest growth in more than a year and rebounding from a 2 percent slip in the first quarter. "Our growth in the weak US market proves that we are on the right path," Chief Executive Frans van Houten told Reuters in an interview. "Overall there is still a lot of uncertainty in the US, holding back investments by hospitals ... but we are outperforming competitors and winning market share."
Van Houten has transformed the former conglomerate into a focused maker of healthcare equipment over the past five years, selling most of its remaining consumer products business in addition to spinning off the lighting division. The group saw an 8 percent rise in new orders globally in the second quarter and van Houten said around half of those orders will turn into revenue before the end of the year, while cost savings would continue to improve profit margins.
This should lead to sales growth of 4-6 percent in 2017 at constant exchange rates, with the order book expanding at the same pace, and an adjusted EBITA margin improvement of around 100 basis points, the company said. ING analyst Nigel van Putten said the order outlook "points to acceleration in the second half of the year", maintaining his buy rating on Philips' shares.
Philips, which has had regulatory problems in the United States in the past few years, agreed last month to buy Spectranetics Corp, a US maker of devices to treat heart disease, for 1.9 billion euros ($2.2 billion) as it expands its image-guided therapy business. On Monday it said its second quarter core profits rose 15 percent to 439 million euros ($511 million), with sales up 4 percent to 4.3 billion euros.
"Despite continued volatility in the markets in which we operate, our outlook for 2017 remains unchanged as we expect further operational improvements and comparable sales growth in the year to be back-end loaded, supported by a strong order book," it said in a statement. Analysts polled by Reuters had predicted average adjusted earnings before interest, taxes, and amortisation (EBITA) of 438 million euros, with like-for-like sales growth of 4 percent.
Copyright Reuters, 2017