The FINANCIAL — Royal Philips Electronics NV, Europe’s biggest consumer-electronics maker, reported unexpected third-quarter operating profit on October 12 as a result of cost reductions but the company remained cautious, saying there are few signs of recovery in most of its markets. The company is in the process of cutting about 6,000 jobs.
Third-quarter net income was 174 million euros ($256 million), or 19 cents a share, from 57 million euros, or 6 cents, in the year-earlier period, the Amsterdam-based company said on October 12, Bloomberg reported. Analysts had predicted a loss of 44.7 million euros, the average of 13 estimates compiled by Bloomberg.
"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," the company said in a statement, according to Reuters. The remarks echo comments made by competitors General Electric and Siemens that underlying recovery had not yet begun.
"The results look excellent," Petercam analyst Eric de Graaf said. "There are more positive one-offs than expected, but even before these items the resultd look good," the same source informs. He said cost cutting especially paid off in the consumer lifestyle unit, which makes products ranging from MP3 players and digital photo frames to water kettles, toasters and shavers.
At Philips’ lighting division, sales were down 13 per cent to €1.65 billion and operating profit dropped by 29 per cent to €40 million, Times wrote. The company is 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 health care, where Philips competes with GE and Siemens, it faced reduced demand for imaging and patient monitoring systems. Stripping out the impact of acquisitions, sales fell 4 per cent and operating profit fell 15 per cent to €110 million as doubts over US health care reform hurt orders, according to the same source. In consumer electronics, sales fell 20 per cent to €1.82 billion, continuing a decade-long slide. However, operating profit more than doubled to €126 million as Philips discontinued unprofitable television lines.
The company has seen “a stabilization of the consumer sentiment,” Philips Chief Financial Officer Pierre-Jean Sivignon said in a Bloomberg Television interview today, Bloomberg reported. “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,” he said.
The world's biggest lighting maker, in the top three for hospital equipment and Europe's biggest consumer electronics producer, Philips is in the process of cutting 6,000 jobs this year to cope with the recession, according to Reuters. It expects cost savings of 600 million euros next year.
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