Philips Q2 profits up on strong sales

[July 19, 2010]  THE HAGUE, Netherlands (AP) -- Football fans buying new flat screen televisions to watch the World Cup helped Dutch electronics maker Royal Philips Electronics NV post a strong rise in second quarter profit on Monday.

Net profit was euro262 million ($340 million), up from euro45 million in the same period a year ago. Revenues rose to euro6.19 billion from euro5.23 billion a year ago, when the company was hit hard by the global economic crisis.

"It is encouraging to see that our performance continues to improve, despite ongoing weakness in many global markets and economic uncertainty," said CEO Gerard Kleisterlee.

The company said it expects sales growth to ease off for the remainder of 2010, in part because many consumers -- particularly in football-mad Latin America -- bought new televisions ahead of the World Cup that finished earlier this month in South Africa.

"After the strong rebound in the first half of the year, we expect comparable sales growth in the remainder of the year to moderate towards mid-single-digit level," the company said in a statement. "This reflects continued but slow recovery in the U.S. and Europe, different seasonality for our television business following soccer's World Cup, and the improved sales performance in the second half of 2009."

Chief Financial Officer Pierre-Jean Sivignon said the company saw "slightly more robust activity than expected in the USA, post-health care reform" for its medical equipment division. However, he said many in the United States were "still digesting" the implications of the Obama Administration's health care overhaul.

Philips shares sank on disappointment at the level of sales growth. By midday (1000 GMT), Philips was down 3.1 percent at euro24.13 in Amsterdam.

"Sales growth of 12 percent was not quite what the market was looking for," said Peter Olofsen, an analyst with Kepler Capital Markets in Amsterdam.

Sivignon defended the revenue figures, saying, "In absolute value, sales for the first half of the year are now approaching the pre-crisis level of 2008."

Consumer electronics led the way for Philips, with revenues in that division rising 20 percent to euro2.18 billion from a year earlier on strong sales of flat screen televisions.

The company's lighting division saw revenues rise 13 percent to euro1.86 billion.

Growth was strongest in emerging markets and particularly the so-called BRIC nations -- Brazil, Russia, India and China. Revenues in emerging markets rose 29 percent to euro2.1 billion -- 34 percent of the company's total revenues. In the same period last year, emerging markets revenues made up 29 percent of worldwide revenue.

Philips has aggressively cut costs to remain competitive in the economic downturn, including slashing some 5,000 jobs last year,

However, the company's staff level rose slightly to 116,590 in the second quarter from 116,023 a year earlier. Reductions in Philips' group management and services and health care divisions were offset by gains at lighting and consumer electronics, thanks largely to the takeover last year of espresso machine maker Saeco.

[Associated Press; By MIKE CORDER]

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