×

Philips Lighting operating profits up in Q3 but warns of softer sales

Philips Lighting, the largest maker of lights globally on Thursday reported third-quarter core earnings growth of 26 percent, but warned of softer sales in Europe and the Middle East.

Adjusted earnings before interest, taxes and amortization (EBITA) were 175 million euros ($191.77 million), up from 139 million euros in the same period a year ago.

However, the company said it no longer expected to meet a target of returning to sales growth in 2016, as growth in LED lighting will not be enough to counter declining sales of traditional lamps.

LED light bulb (L) and a compact florescent (CFL) light bulb
Scott Olson | Getty Images
LED light bulb (L) and a compact florescent (CFL) light bulb

Group sales fell 3.3 percent, stripping out currency effects, to 1.75 billion euros.

"We will continue to implement sales improvement measures and introduce innovative propositions to strengthen our underlying growth profile", said CEO Eric Rondolat in a statement.

He noted the company still expects to grow operating profits and cash flow this year, but sales won't increase until sometime in 2017.

Philips Lighting was spun off from its parent Philips NV in May.

At Philips Lightings' largest division, Lamps, sales fell 15 percent to 570 million euros. Even as competitors such as Osram <OSRn.DE> are exiting this business, Philips expects it to remains a cash cow even as it shrinks. It accounts for the bulk of EBITA, 110 million euros in the quarter.


Philips' LEDs division grew comparable sales by 11.5 percent to 377 million or 40 million of EBITA. That sales growth is solid but slowing from previous rates.

But at the company's Professional Lighting unit, sales fell by 3.8 percent to 706 million euros and EBITA shrank to 42 million euros, with margins declining.

Many analysts say the company's prospects depend upon a turnaround at the professional unit, which competes against Acuity Brands <AYI.N> in the U.S.

Earlier this month Acuity reported a 22 percent rise in sales to $925 million.

Philips said its Americas business showed unspecified growth, but the unit was hit by "worsened market conditions in the Middle East & Turkey" and "a softer outdoor market in some European countries."

Philips Lighting shares closed at 23.10 euros on Wednesday, up from the May IPO price of 20 euros.[uL5N18N54V]. Philips, the parent company, retains a 71.2 percent stake for now.

Follow CNBC International on Twitter and Facebook.