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Dutch health tech firm Philips sees Q3 profit beat with 'fabulous' growth in China

We had absolutely fabulous growth in China: Philips CEO

Dutch health technology firm Philips reported an 18 percent rise in net income that beat market consensus in the third quarter of 2016 with the chief executive touting "fabulous" sales growth in emerging markets such as China but increased volatility in more mature regions.

Net income in the three months to September 30 amounted to 383 million euros ($416. 19 million) compared to 324 million euros in the same period last year, beating analyst expectations. Adjusted earnings before interest, taxes, and amortization (EBITA) — a key measure of a company's operating profitability — rose 14 percent to 649 million euros, just below analyst expectations of 651 million euros.

Comparable sales growth, however, rose just 2 percent year-on-year with western Europe remaining flat and North America up just 1 percent. Frans van Houten, chief executive of Philips, told CNBC that Europe remained a tough region but emerging markets were growing well.

"Maybe we should tackle Europe first because there there is heightened volatility and indeed our quarter growth and revenue growth was not as strong," van Houten told CNBC in a TV interview on Monday.

"But we had absolutely fabulous growth in China and the other emerging geographies such as Southeast Asia, double digit-order, double-digit growth. But also the United States has performed very well for us, with more than a mid-single-digit order intake growth and revenue growth. So overall, I think Philips shows a balanced picture across the world and let's not forget that Europe for us is less than 25 percent of our revenue."

Shares of Philips were over 4.7 percent higher in morning trade.

Philips said that 5 percent sales growth in its health technology portfolio partly offset a 3 percent decline in the lighting business, which it spun off earlier this year, but still holds a 71 percent stake in. The Dutch firm said costs related to the separation of the lighting business totaled 24 million euros in the third quarter, down from 45 million in the previous three months. Philips is aiming to sell-off its stake in Philips Lighting gradually.

"I've always flagged that it will take some time to gradually sell down our interest in lighting and basically pivot to be a medtech company focused entirely on health technology," van Houten said.

The outlook for 2016 remains unchanged, Philips stated.

'Plan B' available for Lumileds

Meanwhile, Philips is still on the hunt to find a buyer for its Lumileds business — a division that makes car components and LED lights.

In January, U.S. authorities blocked a deal by an Asian consortium of buyers, called GO Scale Capital, to acquire an 80 percent stake in Lumileds due to security concerns.

Recent reports suggest that Philips is in talks to sell Lumileds to a private equity firm Apollo Global Management. Van Houten said that selling the business is the key focus but there are other plans if that doesn't work.

Will take time to sell down our stake in lighting: Philips CEO

"If we need to evaluate the whole process of Lumileds, of course, it starts in 2015 where we had a deal which was unfortunately blocked, so in terms of emotions there can certainly be disappointments," van Houten told CNBC.

"But we are happy with the engagement currently and the interest in Lumileds. That's Plan A, of course, if that doesn't work there could always be a plan B. But let's stay focused on trying to get a deal done in the fourth quarter."