Last updated: October 12, 2009 6:54 pm

Philips’ cuts bring a surprise profit

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

Philips on Monday said that it remained cautious about the economy as it unexpectedly reported a small profit, thanks to cost-cutting that compensated for sharply falling revenues.

The Dutch electronics, health and lighting group reported a “low level” stabilisation in consumer sentiment and that the next two quarters would be crucial in deciding which way the economy was going.

“The upcoming selling season will be very important,” Pierre-Jean Sivignon, chief financial officer, said. “It will be important to see at Christmas and Thanksgiving, and increasingly for us the Chinese New Year, how the consumer will behave.”

The group, which has reduced its net debt to €600m ($888m) from €1.5bn a year ago and is shedding 6,000 jobs, beat analyst expectations of a loss with a third-quarter net profit of €176m, up from €58m a year ago. Philips’ sales fell 11 per cent to €5.62bn. The “consumer lifestyle” division’s sales, including products from televisions to baby bottles, fell 15 per cent, the lighting unit’s 13 per cent and healthcare’s 4 per cent.

Philips has found that items such as shavers and beauty products have either seen only single digit sales declines or, in the case of some personal health products, revenue growth. Consumer electronics, by contrast, have been much harder hit.

While it has won praise for its restructuring efforts, the group remains at the mercy of weak markets. It acknowledged this, noting it had yet to see a “structural recovery in the majority of our end-markets”. Its most defensive division, healthcare, has failed to shine in the recession because of reduced spending in the US on big-ticket diagnostics equipment such as CT scanners.

The consumer lifestyle division, a source of recent pain, may have seen sales slip to €2bn from €2.6bn, but it more than doubled operating profit to €129m thanks in part to smaller losses from its television business, where the group last year chose to pull out of the US market.

The lighting business has also suffered, especially Philips’ professional luminaires business that provides built-in lighting to the construction industry. Mr Sivignon said the Chinese government’s stimulus package and Washington’s moves to improve the efficiency of government-owned buildings might indicate a partial recovery.

Philips’ shares closed 7.7 per cent higher at €18.35.

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.

  • Share
  • Print
  • Clip
  • Gift Article
  • Comments

NEWS BY EMAIL

Sign up for email briefings to stay up to date on topics you are interested in

SHARE THIS QUOTE