Philips likely to seek IPO for lighting; first-quarter earnings beat expectations

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AMSTERDAM Dutch medical equipment and services company Philips (PHG.AS) on Monday said it will likely seek an initial public offering of shares for its lighting division, which, as a standalone company, would be the world's largest lighting maker.

Separately, the company published first-quarter earnings before interest, taxes and amortization (EBITA) of 290 million euros ($326 million), beating an estimate of 257 million euros according to expectations of analysts polled by Reuters.

Chief Executive Officer (CEO) Frans van Houten said the company's outlook for 2016 remains unchanged, as most of its earnings improvements will come in the second half of the year due to "macro-economic headwinds" and costs it is taking in the first half related to the separation of the lighting group.

In 2014 Van Houten had announced plans to separate lighting -- the company's original business line at its foundation in 1891 -- saying healthcare technology will now be its primary focus. But the process has taken nearly two years as the company prepared both for an IPO and a direct sale of lighting, whichever was more advantageous for shareholders.

"With equity markets’ sentiment improving compared to the first couple of months of the year, an IPO increasingly appears a more likely outcome," the company said on Monday.

"Philips expects to update the market on conclusions and next steps shortly."

The company's stock is up 6.8 percent this year, but has slightly underperformed the benchmark AEX index of Dutch blue chip shares during van Houten's five-year tenure.

The lighting unit, which has been valued at roughly 5 billion euros, had first quarter EBITA of 102 million euros on sales of 1.69 billion euros. It makes up around 7 percent of Philips' profits.

The bulk of Philip's earnings come from its healthcare operations, which for the first time have been split into multiple new divisions with a view to understanding the company after the lighting split.

The largest division, "personal health," includes the consumer products many still associate with the company such as toothbrushes and electric shavers.

Medical scanners and imaging equipment are grouped into a second division, with the company's "connected" health services -- such as patient monitoring systems and data-crunching for hospitals -- in a third.

Philips said group-wide, comparable sales rose 5 percent to 5.51 billion euros, due to growth in the HealthTech divisions.

Sales at the lighting division shrank by 2 percent, as traditional bulk sales shrank.

The EBITA rise was attributable to greater sales of higher-margin LED lighting products, which now make up more than 50 percent of the portfolio.

(Reporting by Toby Sterling; Editing by Kenneth Maxwell and Christian Schmollinger)