warns healthcare unit will miss forecast earnings
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[July 08, 2014]
By Thomas Escritt
AMSTERDAM (Reuters) -
Philips <PHG.AS> warned its healthcare business would
miss forecast earnings but went some way to reassure
investors by adding its chief executive would take
direct charge of the unit, which contributes 40 percent
of company revenues.
The company, which has recently undergone a major reorganisation to
put healthcare at its core along with lighting, said second-quarter
earnings before income, tax and amortisation from the unit would
disappoint at around 220 million euros ($300.09 million), while
group EBITA would be in line with forecasts at about 400 million
But Philips' shares rose almost 1 percent after the announcement on
Tuesday, in which chief executive Frans van Houten said he would
take direct charge of the division, whose existing head Deborah
DiSanzo will leave the company.
"The quick reaction of the company to a weak first-half healthcare
performance displays a sense of urgency," said Andreas Willi, an
analyst at JPMorgan in a note.
The earnings miss is partly the result of Philips' decision in
January to suspend production at a plant in Cleveland, Ohio, after
an inspection of the plant by the United States Food and Drug
"We anticipate ... EBITA performance in Healthcare to improve in the
second half compared to the same period in 2013 as, among others,
Cleveland gradually resumes production in the course of the third
quarter," Van Houten said, without giving further information about
the other factors that would help.
A Philips spokesman said halting production at the plant, which
makes CT scanners and nuclear medicine products, would cost the
company 60 to 70 million euros EBITA over 2014.
The company said the shortcomings identified by the FDA did not
relate to product safety.
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Willi at JP Morgan cautioned that: "An up to 4 percent cut to full
year consensus healthcare EBITA may weigh more than the offset
elsewhere given healthcare is the 'highest multiple' business at
Philips' healthcare division has played a central part in the
company's reinvention from a consumer electronics company into a
high-end medical solutions and lighting company.
Last month, the company announced plans to spin off its lower-value
lighting components manufacturing business to concentrate on
providing higher-value services and lighting systems.
Philips second quarter results are due on July 21.
(Reporting By Thomas Escritt; Editing by Sophie Walker)
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