Philips Electronics share price down, posts a 24% net profit decline, pledges to improve second-half results

Philips Electronics made an official statement today revealing a 24%-decline in second-quarter net profit and a 4% drop in sales at its body scanner and medical-gear division. The announcement of the company comes after it reduced its profit guidance on the sales at its health-care equipment division earlier in July.

However, Philips said earnings should improve in the second half of the year, boosted by cost reductions and improving sales. The company said in its statement, which was cited by Reuters: “While 2014 is expected to be a challenging year overall, we anticipate EBITA for the group, excluding restructuring and acquisition-related charges and other items, in the second half of the year to exceed the level of the same period last year.”

Philips Electronics said that its net profit declined by 24% over the second three months of the year due to unfavorable exchange rates. A voluntary suspension of output at its health care factory located in Cleveland is also considered as one of the reasons why the companys net profit collapsed during the second financial quarter. According to the companys statement, its earnings are expected to improve during the second six months of the fiscal year due to reduced expenses and higher sales, especially at its health-care unit.

Philips Electronics revealed in its statement that its group net income declined by 24% to 242 million euros (328 million dollars). This result beat the analysts expectations of 160 million euros due to lower taxes but trailed last years performance of 317 million euros.

The company has been reducing its expenses and divesting assets, turning its attention toward several higher-margin activities. Philips has also shared its intentions to spin off its lighting components unit, as well as to put its health care unit, which is currently its largest business, under the direct control of Chief Executive Officer Mr. Frans Van Houten.

As reported by the Wall Street Journal, Mr. Van Houten commented on the companys performance, saying: “In the second quarter we continued to face headwinds, including ongoing softness in certain markets, unfavorable currency exchange rates and the voluntary suspension of production at our health care facility in Cleveland.”

“We are taking decisive action to accelerate value creation, improve performance and capitalize on higher growth opportunities in our businesses,” Mr. Van Houten said for Bloomberg.

Philips Electronics lost 1.23% to trade at 22.98 euros per share in Amsterdam at 11:47 GMT, marking a one year change of -1.84%. The company is valued at 22.26 billion euros. According to the Financial Times, the 25 analysts offering 12-month price targets for Philips Electronics have a median target of 26.00 euros, with a high estimate of 32.00 euros and a low estimate of 23.00 euros. The median estimate represents a 11.76% increase from the last price of 23.27 euros.