Philips Electronics, Europe's biggest consumer electronics maker, said some of its key markets are primed for an upturn in sales, though any growth this year would likely be driven by government spending programs.

The Dutch conglomerate -- the world's biggest lighting manufacturer -- surprised industry experts on Monday with a return to profit in the second quarter, helped by cost cuts.

Its shares were up 5.2 percent at 13.62 euros by 1249 GMT (8:49 a.m. EDT), the top gainers in the DJ Stoxx 50 index, which was up 1.1 percent. The stock rose as high as 13.73 euros, its highest in a month.

Philips said it expected a better second half and said some of its markets, notably in emerging economies, might be bottoming out -- though with global economic data sending mixed signals, Chief Financial Officer Pierre-Jean Sivignon cautioned against hopes of an early consumer-led end to the slump.

If I had to guess I would say (growth) would come from the countries with stimulus packages. Because we know those plans are for real, Sivignon told Reuters.

Quarterly earnings before interest, taxes and amortization (EBITA) reached 118 million euros ($164.4 million), easily beating an average forecast of a 79 million euro loss from a Reuters poll of 23 analysts, as the healthcare division shone.

First signs of recovery, which would mainly benefit its healthcare and lighting units, could come from China and Germany, with the United States and France following next year, Sivignon said.

RAYS OF LIGHT

China's economic growth for instance is being underpinned by a two-year, 4 trillion yuan ($585 billion) stimulus package centered on infrastructure spending.

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 (for Philips), Petercam analyst Eric de Graaf said.

The cautiously optimistic mood was in line with comments from South Korean rival Samsung Electronics, which last week forecast second-quarter earnings would be well above market estimates.

Separately, Philips said it would vigorously oppose claims by the European Commission that it and South Korea's LG Display , in which Philips formerly had a stake, fixed prices for LCD panels.

Its quarterly results were boosted by a strong performance by the healthcare unit, which competes against General Electric Co and Siemens AG and which posted EBITA of 158 million euros, where analysts had expected 96 million euros.

Sivignon said healthcare in the United States showed no further deterioration during the second quarter, though he saw little improvement in the ability of hospitals to finance equipment purchases.

Group earnings were boosted by 57 million euros in insurance recoveries, which many in the market expected to be booked in the current quarter, and a 33 million legal settlement.

In the second quarter of 2008 Philips had posted a 396 million euro profit at the EBITDA level, while in the first quarter of this year it made a 74 million loss.

During the (latest) quarter we started to see the positive impact of our strict cost management, the CEO said, adding that he would not shy away from further cost reductions where needed.

Philips has so far said it would cut 6,000 jobs this year, and nudged higher its initial projection of more than 500 million euros in annual cost savings.

For next year on the back of all that has been announced so far that number should go to 600 million euros, Sivignon said.

(Editing by John Stonestreet and David Holmes)

($1=.7177 euros)

Germany China South Korea Healthcare