The FINANCIAL — Royal Philips Electronics NV, Europe’s biggest consumer-electronics maker, posted bigger-than-expected profit, aided by its health-care unit and shrinking fixed costs. The company said that it hopes to further improve profitability this year.
Fourth-quarter net income was 251 million euros ($355.6 million), or 27 cents a share, compared with a loss of 1.17 billion euros, or 1.26 euros, a year earlier, the Amsterdam- based company said in a statement on January 25, according to Bloomberg. Analysts had predicted profit at 249 million euros, the average of 12 estimates compiled by Bloomberg. The company’s shares rose as much as 4.4 percent, the biggest gain in almost two months.
“Operationally, the results were better than expected in all segments,” said Eric de Graaf, an analyst at Petercam in Amsterdam with an “add” rating on the stock, the same source reports. “Health care was especially very strong despite a difficult market.” Philips Chief Executive Officer Gerard Kleisterlee last January unveiled plans to slash 6,000 jobs amid a slump in demand. The company expects its fixed-cost base will be 700 million euros lower in 2010, Chief Financial Officer Pierre-Jean Sivignon said today.
Fourth-quarter sales continued to improve from the third quarter, to 7.26 billion euros from 5.6 billion euros, and beat average analyst expectations of 7 billion euros, driven by its emerging markets, Reuters informs. The world's biggest lighting maker, also a top-three hospital equipment maker and Europe's biggest consumer electronics producer, gave no hint of a new timeline for its mid-term targets.
"Today's economic circumstances do not allow for a reliable prediction," Kleisterlee said in a statement, adding that the company proposed a 0.70 euro per share dividend "as a sign of confidence" in the future, according to the same source.
As the economic recovery is still uncertain, Kleisterlee said Philips won't resume its share buyback program in 2010, preferring instead "to have financial flexibility to do acquisitions," The Wall Street Journal reports. Philips halted its €5 billion share buyback program in early 2009 due to the economic decline, which hurt demand for the company's products such as television sets, shavers, lighting and medical equipment.
Restructuring and acquisition related charges fell by €191 million to €230 million in the fourth quarter, while financial expenses mostly related to impairment charges came in at €78 million from €705 million a year before, according to the same source. Earnings before interest, taxes and amortization–analysts' preferred measure of operating performance– came in at €662 million compared with €26 million a year earlier and improved across divisions. The company said it now hopes to make progress this year towards its target for an Ebita margin of 10% or better.
Philips competes with the healthcare units and lighting unit of General Electric (GE.N), which beat expectations on Friday and predicted flat earnings for 2010, Reuters reports. German competitor and industrial conglomerate Siemens (SIEGn.DE) said earlier this month trading conditions were still tough, while downward pressure on selling would impact revenues.