Philips surprises with 1.3 bn euro Q2 loss

Philips on Monday made a surprise writedown on acquisitions that dragged the group to a 1.3 billion euro (USD 1.8 billion) second-quarter net loss, just weeks after warning on profits at two key divisions.

The Dutch group -- which is the world's biggest lighting maker, a top three hospital equipment maker, and Europe's biggest consumer electronics producer -- said it took writedowns at its healthcare and lighting divisions, leading to a 1.4 billion euro impairment.

Last month the company warned of sharply lower second-quarter profits and slowing sales growth at both its lighting business and the toasters-to-shavers consumer division, citing weak consumer demand in Europe.

"This is a wider signal that the consumer is not really recovering," said Hans Slob, analyst at Rabobank.

Philips CEO Frans van Houten said in a statement: "We do not expect a material performance improvement in the near term as operational risks and issues remain, and also considering the current uncertain economic environment."

The company will launch a 500 million euros cost savings programme that will run into 2014 and a 2 billion euro share buy-back programme, which will be completed in the next year.

Philips shares have fallen 30 percent in the past 12 months, versus a 16.5 percent rise of the STOXX Europe 600 Personal & Household Goods index.

Restructuring specialist Van Houten, who scrapped Philips' earlier growth targets when he took over as chief executive in April, set new medium-term goals for 2013 on Monday, including sales growth of between 4-6 percent, and earnings before interest, tax and amortisation (EBITA) margins of 10-12 percent for the group.

Rabobank's Slob said that while the share buyback was positive, indicating that management considered the shares to be heavily undervalued, the overall outlook was disappointing.

"The management admits Philips is a lower-margin business," he said, adding that he expected the new guidance to trigger more analysts' downgrades.

"The vision 2013 is disappointing. It is low in terms of profitability and the EBITA margin of 10 to 12 percent is not impressive," said Petercam analyst Marcel Achterberg.

Philips has struggled to compete with lower-cost Asian makers of consumer electronics, while tepid consumer confidence and weak economic growth in Europe and the U.S. have hit demand for products ranging from televisions to electric toothbrushes, as well as its street and home lighting systems.

Philips competes with Samsung and LG Electronics among others in consumer electronics, and with General Electric and Siemens in the hospital and lighting markets.