Philips hits Q2 profit, warns of global mar­kets

The Myanmar Times - - Business -

ELEC­TRON­ICS gi­ant Philips posted a 57 per­cent jump in sec­ond-quar­ter net profit yes­ter­day on the back of a ma­jor ar­bi­tra­tion award, as it warned of volatile mar­kets ahead for the rest of the year.

Net profit surged from 274 mil­lion eu­ros (US$300 mil­lion) to 431 mil­lion eu­ros af­ter Philips was awarded 144 mil­lion eu­ros in an in­ter­na­tional ar­bi­tra­tion fol­low­ing a botched deal to sell its en­ter­tain­ment arm to Ja­pan’s Fu­nai elec­tron­ics com­pany.

Philips in Oc­to­ber 2013 an­nounced it was break­ing off the 150-mil­lioneuro sale, ac­cus­ing long-time busi­ness part­ner Fu­nai of breach of con­tract.

Philips said the Ja­panese firm re­fused “to take the nec­es­sary steps to en­able com­ple­tion of the trans­ac­tion and the trans­fer of the busi­ness”, whose prod­ucts in­cluded hi-fi sys­tems and DVD play­ers.

Both man­u­fac­tur­ers then filed for dam­ages be­fore the In­ter­na­tional Court of Ar­bi­tra­tion.

The Paris-based court in April awarded Philips 135 mil­lion eu­ros, which with in­ter­est and le­gal fees came to an amount of 144 mil­lion eu­ros, Philips spokesper­son Joost Akker­mans said.

Am­s­ter­dam-based Philips said to­tal sec­ond-quar­ter sales dropped by 2pc from 5.97 bil­lion eu­ros to 5.86 bil­lion eu­ros year-on-year, but com­pa­ra­ble sales were up by 5pc in Philips’ core health tech­nol­ogy busi­nesses.

Philips in 2014 an­nounced it was sell­ing off its light­ing busi­ness – a main­stay for more than a cen­tury – to focus more on med­i­cal equip­ment, where mar­gins are stronger and less vul­ner­a­ble to com­pe­ti­tion from emerg­ing mar­kets.

Philips Light­ing suc­cess­fully listed on the Am­s­ter­dam stock ex­change at the end of May and Philips cur­rently holds a ma­jor­ity 71pc share.

Fol­low­ing Philips Light­ing’s spinoff, “Philips will now fully focus on cap­tur­ing ex­cit­ing op­por­tu­ni­ties in the health tech­nol­ogy space,” chief ex­ec­u­tive Frans van Houten said in a state­ment.

Mr Van Houten said Philips’ out­look for 2016 “re­mains un­changed as we ex­pect earn­ing im­prove­ments in the sec­ond half of the year”.

But he warned, “We are con­cerned about in­creased risk due to vo­latil­ity in a num­ber of mar­kets.”

This was due to po­lit­i­cal and mi­croe­co­nomic is­sues “in most ma­jor re­gions such as Europe [in­clud­ing Brexit], the United States, China, Rus­sia, the Mid­dle East and Turkey as well as Latin Amer­ica”, Philips said.

“Such con­di­tions in eco­nomic mar­kets may ad­versely af­fect the tim­ing of, and rev­enues from, on­go­ing di­vest­ments,” it said.

Founded in the south­ern Dutch city of Eind­hoven in 1891, Philips em­ploys 112,000 peo­ple world­wide.

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