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Philips Electronics reported fourth-quarter core earnings above analysts' forecasts and said order intake of its key medical division had picked up as it gained market share, sending its shares higher.

by Niclas Mika

Philips Electronics reported fourth-quarter core earnings above analysts' forecasts on Monday, and said order intake of its key medical division had picked up as it gained market share, sending its shares higher.

Noting worries about the broader economic climate, the shavers-to-lightbulbs group said it was confident it could meet its 2008-2010 targets.

"Around one third of our sales are now from emerging markets, and this means that we have almost a built-in cushion against the effects of deterioration of established markets," Chief Executive Gerard Kleisterlee said, adding India and China had fourth-quarter sales growth of above 20 per cent.

In a weak market, Philips shares were the strongest performer in the Stoxx 50 index, rising 1.6 per cent to 24.77 euros by 0923 GMT while the index was down 2.7 per cent.

Amsterdam-based Philips said earnings before interest, tax and amortisation (EBITA) rose 17 per cent to 865 million euros ($1.3bn), above an average forecast of 798 million euros in a Reuters poll of 13 analysts.

ING analyst Marcel Achterberg said Philips' domestic appliances and consumer electronics divisions had posted strong results on double-digit comparable sales growth.

"With better than expected sales growth and higher than expected margins, we believe Philips is on track to meet its medium-term targets," Achterberg said.

Group sales grew four per cent to 8.4 billion euros, near the high end of analyst forecasts, driven by Philips' lighting and domestic appliances divisions.

Philips said it would propose a dividend of 0.70 euro per share, worth about 715 million euros and up from 0.60 euro per share in the previous year.

Medical order intake picks up

The closely watched medical division -- one of the world's top three hospital equipment makers -- met expectations with EBITA of 354 million euros. Analysts had forecast 353 million euros.

Competitor GE Healthcare reported a four per cent drop in fourth-quarter profit for its health care division on Friday.

Order intake of the division grew TEN per cent on a currency-comparable basis, of which four percentage points were due to four large long-term contracts, Philips said.

Philips Chief Financial Officer Pierre-Jean Sivignon told an analysts' conference call that the division had gained market share both in the United States and internationally, even while the unit struggled with a weaker US market for imaging systems such as computed tomography (CT) scanners.

"Order intake picked up nicely, that should be positive for some improvement in 2008 in this division," SNS Securities analyst Victor Bareno said.

Philips said it planned to accelerate a previously announced five billion euro share buyback and complete it by the end of 2008.

This could mean that Philips -- which ended the quarter with 8.9 billion euros in cash -- could be in a net debt position by the end of April, Sivignon said. The company had earlier said it would have a leveraged balance sheet by 2009.

Philips went on a shopping spree at the end of 2007, agreeing to buy US medical equipment maker Respironics for $5.1bn, lighting maker Genlyte for $2.7bn and medical systems and services provider Visicu for $430m.

Philips' 2008-2010 targets call for average comparable sales growth of at least six per cent annually and EBITA margins of its current businesses of above TEN per cent.

(Additional reporting by Georgina Prodhan in Frankfurt; Editing by David Cowell/Elizabeth Fullerton)


Source: Reuters