Amsterdam: Europe’s largest maker of consumer electronics, Royal Philips Electronics NV, said it won’t meet its target of doubling earnings by 2010 as a weakening economy hurts demand for consumer products.
Philips also said writedowns this quarter will lead to the first net loss since the start of 2003. Philips will slash the value of stakes in companies including liquid-crystal display maker LG Display Co. Ltd and chipmaker NXP BV by €1.1 billion (6,941 crore) this quarter, it said in a statement on Thursday.
The size of disappointments is bigger than assumed, Eric de Graaf, an analyst at Petercam in Amsterdam, wrote in a note. “We expected less of an impact due to a more defensive portfolio,” said De Graaf, who will review his add rating.
Chief executive Gerard Kleisterlee said the speed and ferocity of the economic downturn is taking its toll on Philips earnings. Philips has been exiting the semiconductor industry to become less sensitive to economic swings, focusing instead on industries such as medical equipment and lighting. In October, Philips said it would go slow on its €5 billion buy-back programme to preserve cash.
In April, Philips said earnings before interest, tax and amortization (Ebita) should rise to 10-11% of sales by 2010. Last year, Philips had a margin of 7.7% on that basis. Philips had forecast Ebita per share would double by 2010.
Maud van Gaal and Marcel van de Hoef contributed to this story.