Dutch conglomerate Philips is pushing ahead with a spin-off of its lighting business despite Russia, China and a string of charges dragging it down to a net loss in the third quarter. David Pollard reports.
It was seen as a lightbulb moment for Philips. Splitting off its lighting division into a separate unit was the plan announced last month. And it is still going ahead, the company says, despite a weaker performance in the third quarter. Philips CEO Frans van Houten. SOUNDBITE (English) PHILIPS CEO FRANS VAN HOUTEN: ''It's a bit of a puzzle because we had headwinds from currency and we have these massive, one-off incidents like the jury verdict in the United States on a patent litigation case as well as a one-off write-off with regard to inventory related to the Cleveland situation. Barring these effects, we are actually confident that our operational results is gradually improving, currency headwinds will start to abate from the fourth quarter onwards and we think that 2015 will be a much better year.'' The US jury verdict resulted in one-off charge of 366 million euros relating to a lawsuit against medical equipment manufacturer, Masimo. The writedowns in Cleveland amounted to a further 49 million euros after production was suspended at its plant there. All all in all, Philips is booking a net loss of 103 million euros on sales of 5.5 billion. That's down from a net profit of 281 million for the same period last year. Russia is a concern: there's less demand, says Philips, thanks to sanctions and to consumers spending less. And China. SOUNDBITE (English) PHILIPS CEO FRANS VAN HOUTEN: ''In China, I think we need to be prepared for a structurally lower GDP growth, maybe around six or seven per cent. I think there is a short-term slowdown in the demand from hospitals as well as in the lighting market due to some glut inventory in the pipeline. We think that that will start to abate in the course of 2015.'' The weaker figures sent shares down four per cent when European markets opened. But Philips says it's confident of an improving outlook - with a focus very sharply on its healthcare division. That makes hospital equipment and personal care products, targeting growth in emerging markets. Philips was founded on its lighting division 123 years ago. But the process of separating that is likely to take only 12 to 18 months - probably via an IPO.