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Soft demand and one-off charges push Philips to third-quarter loss
October 20, 2014 / 6:22 AM / 3 years ago

Soft demand and one-off charges push Philips to third-quarter loss

AMSTERDAM, Oct 20 (Reuters) - Dutch healthcare and lighting company Philips swung to a net loss in the third quarter after weak demand in key markets such as Russia and China was compounded by a patent lawsuit ruling against the company and inventory writedowns.

Philips said it expected adjusted earnings before interest, tax and amortisation (EBITA) in the second half to be slightly below the level in the same period last year but that it remains committed to its targets for 2016.

The company made a net loss of 103 million euros ($131 million) on sales of 5.5 billion euros in the third quarter, compared with a net profit of 281 million euros on sales of 5.6 billion euros in the same period last year. Its EBITA loss was 7 million euros.

The net loss and sales were in line with the expectations of analysts polled by Reuters, who had forecast a net loss of 107 million euros on sales of 5.6 billion euros. The EBITA loss, however, was far worse than the average forecast for a 59 million euro profit.

The company was hit by several one-off charges including a 366 million euro charge relating to a lost patent lawsuit against medical equipment manufacturer Masimo, which Philips is appealing.

There were 49 million euros in inventory writedowns after an earlier production suspension at its Cleveland, Ohio, factory.

“We are not satisfied with our overall performance in the third quarter,” said Philips CEO Frans van Houten, adding that the company faced “sustained softness” in a number of key markets including China and Russia.

“We were also confronted by an adverse jury verdict with a surprisingly high proposed award in the Masimo litigation, which we will appeal. On a positive note, production at our Cleveland facility is ramping up.”

The company, which began life more than a century ago as a maker of lightbulbs, sold off the last of its consumer electronics business last year and is now in the process of splitting into a lower-margin lighting business and a more profitable healthcare technology business. (1 US dollar = 0.7839 euro)

Reporting By Thomas Escritt; Editing by David Goodman

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