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Preparing to split off its lighting business

Preparing to split off its lighting business

Philips, the Dutch healthcare and lighting company, on Tuesday reported a big drop in fourth-quarter profits and said it was unlikely to hit its financial targets for the next two years.

The company, which began life making light bulbs, is preparing to split off its lighting business to expand its higher-margin healthcare and consumer arms. The group said it expected up to 400 million euros ($449 million) in costs this year from the shake-up, more than analysts had expected.

Philips' fourth quarter net profit fell to 134 million euros ($150.6 million), from 412 million euros, mostly due to the costs of closing a medical equipment manufacturing plant in Cleveland, Ohio. The company had flagged this in a profit warning on Jan. 13.

Chief Executive Frans van Houten described the 2014 performance as a setback but that Philips would overcome the problems in Cleveland, price erosion in lighting and slower-than-expected global growth.

"I didn't know Russia would collapse, or China would be significantly slowing," he said on a call with journalists. Van Houten will seek reappointment when his term expires in March.

Philips' shares fell as much as 5 percent in early trading and were one of the biggest fallers in the FTSEurofirst 300 index of pan-European shares. Philips shares have fallen 2 percent in the past year, compared to a 17 percent rise of the benchmark index of Dutch shares.

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