Phillips Q3 Profits Treble
Royal Philips Electronics NV reported net profit of €174 million ($256 million) for the third quarter on Monday, three times the depressed levels of a year ago, due to cost-cutting measures.
In the same period in 2008, the world’s largest lighting manufacturer had reported profits of €57 million, including around €80 million in net restructuring and impairment charges.
Despite the increase in profit, the company said sales fell 11 percent to €5.62 billion in the third quarter of 2009, as demand continued to lag for consumer electronics, high-end health care equipment and many kinds of lights, notably those used in the automobile industry.
Philips added it had not seen “structural recovery in the majority of our end-markets.”
In a statement, the company’s chief executive said “underlying” margins — a nonstandard term — were “among the highest in recent years” at 6.8 percent of sales.
“Most businesses across the company saw further improvement in both comparable sales and underlying earnings compared to the previous quarter,” Gerard Kleisterlee said.
Analysts said the results beat expectations and shares rose 5.7 percent to €18.00 in Amsterdam.
“Margins were better than expected all across the board,” said analyst Eric de Graaf of Petercam Securities, who repeated an Add advice on shares.
Though sales were down from a year ago, they were flat from the previous quarter and “the first rays of light are becoming visible,” De Graaf wrote in a note on the earnings.
He praised the company for cutting costs and maintaining a strong financial position: net debt is €621 million, down by a billion from a year ago and easily manageable for a company Philips’ size.
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 expanding its offerings of energy-efficient LED lights as the technology enters the mainstream.
Philips also said it is opening chains of Philips-branded lighting stores in China and India.
In health care, where Philips competes with GE and Siemens, the company said it faced reduced demand for imaging and patient monitoring systems. Stripping out the impact of acquisitions, sales fell 4 percent and operating profit fell 15 percent to €110 million.
Philips said that uncertainty around U.S. health care reform was hurting orders, which were down 7 percent.
In consumer electronics, sales fell 20 percent to €1.82 billion, continuing a decade-long slide. However, operating profit more than doubled to €126 million as Philips discontinued unprofitable television lines.
Once the largest maker of consumer electronics in Europe, Philips has instead been focusing on fewer products with better margins.
10/12/2009 6:48 AM TOBY STERLING, AP Business Writer AMSTERDAM