Philips Electronics reports profit in Q4

[January 25, 2010]  AMSTERDAM (AP) -- Royal Philips Electronics NV, the world's largest maker of lights, reported a net profit of euro251 million ($355 million) for the fourth quarter on Monday, helped by lower one-time charges and by job cuts.

The net profit reverses a loss of euro1.18 billion in the same period a year ago, which included euro629 million in impairment charges on assets. Fourth quarter sales fell 3.4 percent to euro7.26 billion.

Philips has shed 5,474 jobs in the past year and now employs around 116,000.

Chief Executive Gerard Kleisterlee said operating profit margins, excluding restructuring charges, were above 12 percent, their highest level in a decade.

Shares rose 4.7 percent in early Amsterdam trading to euro21.285.

The results "were better than expected on most counts," analyst Eric de Graaf of Petercam Bank wrote in a note on the earnings.

Though sales declined at Philips' consumer products and lighting divisions, De Graaf said they were still better than expected, and "margins were better...all across the board."

De Graaf confirmed an "Add" rating on the shares but said he was considering raising estimates since sales have stopped falling from quarter to quarter and the company's margins may expand further.

Asia and Latin America were the main sources of the company's earnings growth, offsetting a flat performance in Europe and a decline in the United States.

Philips' operating profit from high-end medical products such as imaging machines was euro392 million in the fourth quarter, versus euro279 million a year ago.

On a phone call with reporters, CEO Kleisterlee forecast growth in the health care arm, already the company's most profitable.

"We are bound to see gradual improvement in health care" in 2010, he said. "The U.S. market in our view has come to the low point, actually, from which with or without a conclusion of the Obama health care reform it can only go up."

At lighting, operating earnings were euro41 million, versus a loss of euro376 million a year earlier amid restructuring costs. Philips noted that 10 percent of its lighting sales now come from LED lights.

"Energy efficiency is a big driver of end markets in the lighting sector," Kleisterlee said.

He noted the company was also benefiting from the phase-out of incandescent bulbs -- energy-saving bulbs have higher profit margins.

At Philips' consumer products division, operating earnings were euro260 million versus a loss of euro40 million. That's mostly due to a turnaround at its television unit, which accounts for more than a third of division sales.

"I think our portfolio is pretty robust," Kleisterlee said, with health care spending steady even in a downturn and energy-efficient lighting likely to grow.

[Associated Press; By TOBY STERLING]

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