Philips shares rise on US order book

Philips said it expects sales growth to accelerate over the remainder of the year after US orders jumped 9% in the second quarter.

Improving business in the group’s biggest market, on top of a 15% rise in second-quarter core earnings sent Philips’ shares up as much as 4%. The Dutch health technology company, 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% rise in second-quarter sales but a 10% drop in orders, but investors were encouraged by its performance in the US, which contributes more than a third of group revenue. US sales grew 4% in the first quarter from a year earlier, the fastest growth in more than a year and rebounding from a 2% 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 said.

“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.”

Mr Van Houten has transformed the former conglomerate into a focussed 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% rise in new orders globally in the second quarter and Mr 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% in 2017 at constant exchange rates, with the order book expanding at the same pace, and an adjusted earnings 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.

Reuters


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