Dutch electronics company Royal Philips Electronics NV (PHIA.AE) Monday reported a net profit for the second quarter, beating analysts' expectations for a loss, as it booked gains from insurance recoveries and legal settlements, but it raised its cost cutting targets even though executives said markets were showing signs of stabilizing.

The company, which has seen demand for its lighting equipment, consumer products and healthcare products hit by the economic downturn and credit crunch, also said it had received cartel charges from the European Commission in May due to alleged price fixing by one of its former units, LG Philips LCD Co. It said it would vigorously oppose the charges, which the Commission also brought against a number of other unnamed companies supplying liquid crystal display panels.

Philips realized a EUR44 million net profit in the second quarter to June 30, helped by an EUR90 million pretax gain on insurance recoveries and legal settlements. The figure was still well below the EUR732 million profit it posted a year earlier as revenues fell to EUR5.2 billion, from EUR6.5 billion.

Analysts said the result beat expectations, with higher margins at the healthcare unit better than hoped due to cost cutting. At 1240 GMT, Phillips' shares were up 5.1%, outpeforming a 1.8% rise in the benchmark AEX index in Amsterdam.

Sales at the healthcare unit fell 5% on a comparable basis, compared with an 18% fall at the lighting unit and a 30% decline at consumer lifestyle, which produces items like coffee machines and grooming products.

In recent years, Phillips has moved away from traditional consumer electronics and strengthened its footprint in healthcare and well-being markets in an effort to become less prone to cyclical economic cycles. However, the company is experiencing difficulties in the U.S. healthcare market because regulatory uncertainties and a difficult financing climate is putting pressure on sales of Philips imaging systems and clinical care systems, like X-ray and ultrasound equipment.

Chief financial officer Pierre-Jean Sivignon said that while financing for medical equipment became "a touch easier", regulatory uncertainty is still causing clients to delay medical equipment spending in the U.S.

The company said it expects to book EUR50 million in restructuring and acquisition-related charges at the unit in the third quarter. It booked EUR148 million in charges in the second quarter.

Chief Executive Gerard Kleisterlee said that, overall, he is still cautious about the economy and the markets in which Philips operates, though the company is seeing some signs that the decline is bottoming out.

Reflecting that caution, Philips said it is now targeting more than EUR600 million in annual cost savings, up from its previous target of over EUR500 million by the end of the year. It is stripping out costs by moving more production to low-cost countries, improving its supply chain and lowering IT costs.

"With an outlook of ongoing cost cutting, but also the first signs of stabilization, and maybe even a cautious improvement, the first rays of light are becoming visible," said Petercam analyst Eric de Graaf, who rates Philips at add.

-By Robin van Daalen, Dow Jones Newswires; +31 20 571 52 01; robin.vandaalen@dowjones.com

(Peppi Kiviniemi contributed to this report.)