Philips profit hit by TV sales

City A.M. Reporter
Philips Electronics reported lower-than-expected fourth-quarter net profit, as poor TV sales hit its lifestyle division, and warned that consumers in mature markets will be reluctant to spend this year.

The Dutch lifestyle, healthcare and lighting giant said it has seen a revical in the construction sector, which is expected to lift its lighting division in the second half.

Overall drivers for growth will come from emerging markets, which account for about one third of group sales and are a focus for expansion, Philips said.

"Overall, Philips results are somewhat disappointing mainly due to the weaker-than-expected consumer lifestyle division," said Sjoerd Ummels, ING analyst.

"Philips stresses that consumer sentiment will continue to be subdued throughout 2011 and it's not a surprise, but still we've had two years of weak consumer sentiment in mature markets, and apparently there's no end in sight."

Philips reported net profit of 465m euros (£395m), well short of the 532m euros average forecast in a Reuters poll of 20 analysts.

Sales for the quarter were 7.392bn euros, up 1.8 per cent, against a forecast of 7.56 bn euros, as the rice cookers-to-toasters consumer lifestyle 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 fourth-quarter EBITA of 151 million euros, well below a forecast of 267 million euros and down 43 per cent from a year ago.

Fourth-quarter EBITA for the healthcare division, which supplies scanners and other hospital equipment, was 522m euros, slightly above the forecast of 514m euros and up 15.5 per cent from a year ago.

The lighting division, which produces light bulbs and street lighting systems and whose fortune is tied partly to the health of the construction industry, reported EBITA of 198m euros, below analysts' expectations for 218m euros, and up 141 per cent from a year ago.