Drop in TV prices drags down Philips Q1 profit

Royal Philips Electronics NV, Europe's largest consumer electronics maker, reported a bigger decline in first-quarter profit than analysts estimated as flat-panel television sales and prices fell.

Net income fell 75 percent to 219 million, or 21 cents a share, from a year ago, when Amsterdam-based Philips had a gain from selling Taiwan Semiconductor Manufacturing Co shares. Sales rose 0.5 percent to 5.97 billion euros. Analysts had predicted profit of 276 million euros, the median of 14 estimates in a Bloomberg News survey.

Philips fell as much as 3.2 percent in Amsterdam trading. Chief Executive Officer Gerard Kleisterlee said pressure on profit margins in televisions probably will continue. Philips, Europe's largest maker of televisions, said last week it will exit the unprofitable North American TV business.

"The results are again quite disappointing, especially because of continuous margin pressure" in TVs, said Wim Zwanenburg, a fund manager at Bank Degroof Group, which oversees the equivalent of $43 billion.

Philips fell 47 cents, or 2 percent, to 23.43 euros as of 9:25 am in Amsterdam. Before yesterday, Philips shares lost 19 percent this year, compared with a 12 percent slide in the Amsterdam Exchanges Index.

Philips said on April 8 it would give Funai Electric Co the right to use its brand name to sell televisions in North America, where Philips generated one-sixth of its 6.27 billion euros in TV sales last year. It will also take measures at its global flat- panel television operations to boost earnings.

Philips has no plans to take similar measures in the European TV unit, which is a "stronger business", Chief Financial Officer Pierre-Jean Sivignon said in an interview.

The loss before interest, tax and amortization at the television unit widened to 95 million euros in the quarter from 51 million euros a year earlier. Analysts had anticipated a loss of 72.5 million euros. Sales dropped 5.1 percent to 1.22 billion euros.

Kleisterlee has shifted the company's focus to areas with more stable earnings, such as medical equipment and lamps. Philips announced or completed more than 10 billion euros of purchases since 2005, including medical-equipment maker Respironics Inc for 3.6 billion euros, its largest takeover. The company booked 38 million euros of acquisition-linked charges in the first quarter.

Sales at the healthcare unit rose 5 percent excluding acquisitions, disposals and currency swings. "Healthcare earnings picked up at the right moment, when everyone thought results would be suffering," said Wing-Yen Choi, an analyst at Theodoor Gilissen in Amsterdam, who recommends investors buy the stock. "Healthcare is the company's showpiece. It's a good sign that this unit is doing well."

In the year-earlier period, Philips recorded a gain of 733 million euros from selling shares in Hsinchu, Taiwan-based Taiwan Semiconductor.

Agencies

(China Daily 04/15/2008 page16)