Philips Profit Falls; Company to Move Televisions Into Venture

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  • Posted on April 18, 2011


    Visitors walk through the Royal Philips Electronics NV exhibit at the Internationale Funkausstellung consumer electronics trade fair in Berlin, Germany. Photographer: Michele Tantussi/Bloomberg

    Royal Philips Electronics NV, Europe’s largest maker of consumer electronics and lighting equipment, said first-quarter profit fell by the third, dragged down by the television unit that will move to a joint venture.

    Net income at the maker of and shavers and medical equipment fell to 137 million euros ($200 million) from 200 million euros a year earlier, the Amsterdam-based company said in a statement today. Analysts surveyed by Bloomberg had estimated profit of 172 million euros. Sales rose 6.2 percent to 5.26 billion euros, Philips said.

    Chief Executive Officer Frans van Houten, who took over at the start of this month, has made fixing the TV division his top priority, after his predecessor struggled to turn around the business for a decade. Philips said today that it will move the division into a joint venture with TPV Technology and cede control of the partnership by keeping a 30 percent stake.

    Van Houten said the company predicts “headwinds” in 2011, citing the fallout from the Japanese earthquake, which will affect revenue and the company’s supply chain.

    The consumer division, Philips’s largest by revenue, had operating profit of 104 million euros in the quarter, compared with 162 million euros a year earlier. Televisions will be treated at a discontinued business, Philips said today.

    At the health-care division, operating profit rose to 138 million euros from 103 million euros, Philips said. The company is Europe’s second-largest maker of medical technology after Siemens AG (SIE), which also competes with Philips in lighting. Operating earnings at the lighting unit fell to 152 million euros from 204 million euros, Philips said.

    Philips said last month that it will likely fail to break even with the TV business this year, marking the fifth consecutive annual loss. The television subsidiary has suffered as Sony Corp. and Panasonic Corp. cut prices. To combat local Chinese suppliers, and Philips has sought to limit losses by farming out some production.

    The company has a target for earnings per share to grow at twice the rate of sales until 2015 as Philips focuses on more profitable lighting and medical products and faster-growing markets including India and Brazil. Revenue excluding acquisitions, disposals and currency shifts will increase 2 percentage points faster than global economic growth, Philips said when it set the goals. It excluded TV operations.

    To contact the reporter on this story: Maaike Noordhuis in Amsterdam mnoordhuis@bloomberg.net

    To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net

    Bloomberg/AC