Royal Philips Electronics announce increase in profits

Philips

The Dutch electronics group, Royal Philips Electronics NV has reported a tripling of third-quarter profits. This is being credited with strong underlying trading and heavy cost-cutting.

The company reported better-than-expected third-quarter net income of €174 million, which is up from €57 million in the same three months of last year.

Cost-cutting, which resulted in about €80 million of net restructuring and impairment charges, helped offset an 11 percent decline in sales to €5.62 billion amid a continued lag in demand for consumer electronics, high-end healthcare equipment and lighting.

The company said that it had not seen "structural recovery in the majority of our end-markets", although underlying margins had been "among the highest in recent years, at 6.8 percent of sales"

Gerard Kleisterlee, chief executive, said: "Most businesses across the company saw further improvement in both comparable sales and underlying earnings compared to the previous quarter."

At Philips' lighting division, sales were down 13 percent to €1.65 billion and operating profit dropped by 29 percent to €40 million.

The company is in the midst of expanding its range of energy-efficient LED lights as the technology enters the mainstream, while it is opening chains of Philips-branded lighting stores in China and India.

In healthcare, where Philips competes with GE and Siemens, it faced reduced demand for imaging and patient monitoring systems. Taking out the impact of acquisitions, sales fell 4 percent and operating profit fell 15 percent to €110 million as doubts over US healthcare reform affected orders.

In consumer electronics, sales fell 20 percent to €1.82 billion, continuing a decade-long slide.

Yet, operating profit more than doubled to €126 million as Philips discontinued their unprofitable television lines.

Pierre-Jean Sivignon, chief financial officer, said that Philips, which has been focusing on fewer products with better margins, had seen "a stabilisation of the consumer sentiment".

He said: "The proof of the pudding will be in the upcoming selling season, Christmas and Thanksgiving, and we have to see how that actually works out in the weeks to come."

Philips was once the largest maker of consumer electronics in Europe, but recently it has instead been focusing on fewer products with better margins.

The firm is currently in the process of cutting around 6,000 jobs, and said, "While encouraged by the positive development in sales and profitability during the third quarter, we remain cautious about the short-term outlook in the absence of structural recovery in the majority of our end-markets."

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