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Philips looks East as weak TV sales hit profit

Philips looks East as weak TV sales hit profit
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First Published: Mon, Jan 24 2011. 05 25 PM IST
Updated: Mon, Jan 24 2011. 05 25 PM IST
Amsterdam:Philips Electronics blamed TV sales for disappointing fourth-quarter profit and said western consumers would be reluctant to spend in 2011, adding urgency to its drive into emerging markets.
Shares in the Dutch consumer appliances, healthcare and lighting group, which is seeking to boost sales in fast-growing countries including China and India, tumbled more than 6% after it posted results on Monday.
By 1154 GMT, the stock was down 5.8% at 23.15 euros, the second-biggest faller on the FTSEurofirst 300 index of top European shares.
Philips competes with General Electric and Germany’s Siemens , which is due to report on Tuesday.
Philips on Monday posted net profit of 465 million euros ($649.6 million), well short of the 532 million euros average forecast in a Reuters poll.
“Philips results are somewhat disappointing mainly due to the weaker-than-expected consumer lifestyle division,” said Sjoerd Ummels, ING analyst.
“We’ve had two years of weak consumer sentiment in mature markets, and apparently there’s no end in sight.”
Two new executives are set to take the helm in April, to tackle the twin challenge of weak demand in mature markets such as Europe and, to a lesser extent, the US and expansion in emerging markets that also include Russia, central and southeast Asia.
Frans van Houten steps up as chief executive, and Ron Wirahadiraksa becomes chief financial officer.
Both men have restructuring and cost-cutting track records and have experience in Asia. Van Houten, a former chief executive of Philips’s semiconductor business NXP, was appointed chief operating office on 1 January in preparation for the move to CEO.
Philips is aiming for emerging markets to be at least 40% of group sales by 2015 compared with 33% now.
Pierre-Jean Sivignon, Philips’s outgoing chief financial officer,said Insider the group has a pipeline of acquisitions, particularly in emerging markets, and that it would consider a share buyback if deals do not materialise.
Earlier on Monday, Philips said it would acquire the assets of Preethi business, a leading kitchen appliances company in India, but did not disclose financial details.
Last Friday, General Electric reported better-than-expected earnings for the quarter. Earlier this month, Siemens reported that year-on-year order growth at its healthcare sector in the last three months of 2010 was driven by its medical imaging business.
Philips said fourth-quarter sales were 7.392 billion euros, up 1.8%, against a forecast of 7.56 billion euros, as the rice cookers-to-toasters consumer business was hit by another quarter of weak TV sales.
“Sales were impacted by negative consumer sentiment in developed markets, while continued destocking in the trade resulted in a particularly slow December,” outgoing chief executive Gerard Kleisterlee said in a pre-recorded audio statement.
The consumer division reported earnings before interest, tax and amortisation (EBITA) of 151 million euros, well below a forecast of 267 million euros and down 43 % from 2010.
The lighting division, which produces light bulbs and street lighting systems and whose fortune is tied partly to the construction industry, reported EBITA of 198 million euros, below analysts’ expectations for 218 million euros, and up 141% from a year ago.
The company said it sees a pick-up in the construction sector, which is set to lift its lighting business in the second half.
EBITA for the healthcare division, which supplies scanners and other hospital equipment, was 522 million euros, slightly above the forecast of 514 million euros and up 15.5% from a year ago.
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First Published: Mon, Jan 24 2011. 05 25 PM IST