Philips posts 7% rise in Q4 sales amid plans to further sharpen focus on healthcare via domestic appliances unit split

Headline results for the fourth quarter:

Revenue

€6 billion ($6.6 billion)

+7%

Profit

€556 million ($612 million)

Versus €678 million ($746 million)

Note: All changes are versus the prior-year period unless otherwise stated

What the company said:

"I am encouraged that the three business segments together delivered 4% comparable sales growth," remarked CEO Frans van Houten, adding "this performance was partly offset by lower intellectual-property royalties compared to the fourth quarter of 2018."

Philips also said Tuesday that it will review options for its domestic appliances business and has started to create a separate legal structure for the division, which is expected to be completed in 12 to 18 months. "The domestic appliances business has significantly contributed to Philips, but it is not a strategic fit for our future as a health technology leader," van Houten commented.

Additionally, Roy Jakobs, currently chief business leader of Philips' personal health unit, has been appointed as chief business leader of the connected care division, effective immediately. Jakobs succeeds Carla Kriwet, who will leave the company. Meanwhile, van Houten will head the personal health business on an interim basis as the company searches for a replacement.

Other results:

  • Diagnosis & Treatment: €2.6 billion ($2.9 billion), up 10%, driven by high-single-digit growth in image-guided therapy and mid-single-digit growth in ultrasound, while diagnostic imaging saw gains in the low-single digits
  • Personal Health: €1.9 billion ($2.1 billion), up 6%, with double-digit growth in oral healthcare and mid-single-digit growth in personal care
  • Connected Care: €1.4 billion ($1.5 billion), up 6%, although comparable sales growth in the division was only 2%, with mid-single-digit gains in the unit's monitoring and analytics segment, while sales in sleep and respiratory care were flat and orders fell by 1%
  • Sales in mature markets: €3.9 billion ($4.3 billion), up 4%, with mid-single-digit growth in North America and low-single-digit growth in Western Europe, partly offset by a double-digit decline in other mature geographies, primarily due to phasing of sales in Japan
  • Sales in growth markets: €2 billion ($2.2 billion), up 13%, with double-digit growth in China
  • Full-year revenue: €19.5 billion ($21.5 billion), up 8%
  • Full-year profit: €1.2 billion ($1.3 billion), versus €1.1 billion ($1.2 billion) in the prior year

Looking ahead:

Van Houten noted that Philips continues "to see geopolitical and economic risks" this year, and is aiming for comparable sales growth of between 4% and 6%. The company had warned in October that US-China trade relations, as well as poor performance in connected care, would hurt its earnings margin in 2019. However, the executive added that the company's "performance momentum...is expected to improve in the course of the year."

What analysts said:

Commenting on the potential sale of the domestic appliances business, Bloomberg Intelligence analysts said that Philips may sharpen its focus in healthcare technology by investing further in devices and software, adding that the unit may be valued at €2.3 billion ($2.5 billion) to €3.3 billion ($3.6 billion). Meanwhile, Bloomberg Intelligence analyst Jawahar Hingorani suggested the move may boost mergers and acquisitions.

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