Philips’ Q3 net profit triples to $256M, sales slump 11%

Mon, 10/12/2009 - 8:05am
Toby Sterling, AP Business Writer

AMSTERDAM (AP) – Royal Philips Electronics NV reported net profit of euro174 million ($257.5 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 euro57 million ($84.4 million), including around euro80 million ($118.4 million) in net restructuring and impairment charges.

Despite the increase in profit, the company said sales fell 11 percent to euro5.62 billion ($8.3 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."

The company's CEO said "underlying" margins – a non-standard 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 euro18.00 ($26.64) 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 euro621 million ($919 million), down by a billion from a year ago and easily manageable for a company Philips' size.

In consumer electronics, sales fell 20 percent to euro1.82 billion ($2.69 billion), continuing a decade-long slide. However, operating profit more than doubled to euro126 million ($186.5 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.

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