Citing improved margins brought about by cost-saving measures, insurance recoveries and legal settlements, the Amsterdam-based conglomerate Philips Electronics NV surprised the market on Monday with its return to profit in the second quarter that ended June 30!

While the analysts had forecast a second quarter loss for the company, it dramatically reported a €45 million net profit, as against the same quarter year-before figures of a €732 million net profit. Though the company is optimistic about an upturn in business in the second half of the year, it said that it would remain cautious on outlook.

Philips Electronics' second quarter 'earnings before interest, taxes and amortization' (EBITA)- which is the most preferred measure used by analysts to assess operating performance - stood at €118 million profit, in comparison to a €396 million profit last year; the analysts had anticipated EBITA to come in at a €69 million loss.

However, the 19 percent drop in the company's sales during the quarter, fell fairly in line with the analysts' expectations.

Talking about the changed-for-the-better scenario for Philips electronics and its return to profitability, the company's Chief Executive Officer Gerard Kleisterlee said: "During the quarter we started to see positive impact of our strict cost management."

Kleisterlee also added that the company would not refrain from undertaking further cost reductions, if required.