(Adds context, analyst quote)
By Thomas Escritt
AMSTERDAM, July 8 Philips warned its
healthcare business would miss forecast earnings but went some
way to reassure investors by adding its chief executive would
take direct charge of the unit, which contributes 40 percent of
The company, which has recently undergone a major
reorganisation to put healthcare at its core along with
lighting, said second-quarter earnings before income, tax and
amortisation from the unit would disappoint at around 220
million euros ($300.09 million), while group EBITA would be in
line with forecasts at about 400 million euros.
But Philips' shares rose almost 1 percent after the
announcement on Tuesday, in which chief executive Frans van
Houten said he would take direct charge of the division, whose
existing head Deborah DiSanzo will leave the company.
"The quick reaction of the company to a weak first-half
healthcare performance displays a sense of urgency," said
Andreas Willi, an analyst at JPMorgan in a note.
The earnings miss is partly the result of Philips' decision
in January to suspend production at a plant in Cleveland, Ohio,
after an inspection of the plant by the United States Food and
"We anticipate ... EBITA performance in Healthcare to
improve in the second half compared to the same period in 2013
as, among others, Cleveland gradually resumes production in the
course of the third quarter," Van Houten said, without giving
further information about the other factors that would help.
A Philips spokesman said halting production at the plant,
which makes CT scanners and nuclear medicine products, would
cost the company 60 to 70 million euros EBITA over 2014.
The company said the shortcomings identified by the FDA did
not relate to product safety.
Willi at JP Morgan cautioned that: "An up to 4 percent cut
to full year consensus healthcare EBITA may weigh more than the
offset elsewhere given healthcare is the 'highest multiple'
business at Philips."
Philips' healthcare division has played a central part in
the company's reinvention from a consumer electronics company
into a high-end medical solutions and lighting company.
Last month, the company announced plans to spin off its
lower-value lighting components manufacturing business to
concentrate on providing higher-value services and lighting
Philips second quarter results are due on July 21.
($1 = 0.7331 Euros)
(Reporting By Thomas Escritt; Editing by Sophie Walker)