Philips Q1 hurt by one-off charge, revenues strong
AMSTERDAM, Apr 18 (Reuters) Dutch Philips Electronics missed analysts' forecasts on Tuesday with a first quarter that was depressed by its stakes in unconsolidated companies, but said it was on track for its medium term outlook for sales and profitability.
Philips's net profit came in at 160 million euros (3.6 million) compared with an average forecast of 221 million euros by 21 analysts polled by Reuters. Net profit in the year-ago period was 117 million euros.
A charge of 45 million euros at its bankrupt television and monitor tubes display joint venture LG.Philips Displays dragged the result of unconsolidated companies to a loss of 36 million euros, versus an average analyst expectation of a 26 million euro profit.
Revenues of the TVs to hospital equipment maker rose faster than expected to 7.37 billion euros from 6.64 billion a year earlier, and compared with an average analyst forecast of 7.03 billion euros.
Adjusted for takeovers, divestments and currency fluctuations, revenues rose 10 percent, thanks to strong sales of new shavers, flat televisions, medical equipment and lamps in all regions of the world.
''There is a charge for the LG.Philips Displays business of 45 million. If you take that out, it fits with expectations. If you look at revenues they are significantly better,'' said analyst Eric de Graaf at broker Petercam.
Income from operations from its core business units came in at 335 million euros against an average analyst expectation of 334 million and a year-ago profit of 207 million.
''We're pleased that we're keeping our momentum, with strong growth and solid performance across all our main divisions,'' Chief Executive Gerard Kleisterlee said in a statement.
CHIP RECOVERY The result was boosted by a sharp upturn in the semiconductor division which increased its income from operations to 89 million euros from 14 million a year ago.
Analysts had expected a 99.4 million euro operating profit.
The chips unit is benefiting from additional restructuring and an improving product portfolio designed to power growth sectors such as cell phones, mobile TV, flat digital televisions, high definition TV set top boxes and personal video recorders.
Philips has said the chips unit, the world's 9th biggest with 4.6 billion euros of 2005 sales, will be made independent and prepared for a merger that will help it increase scale. The unit's manager Frans van Houten needs higher sales to justify massive research and development for new microchips.
Philips said it was on track to separating its chips unit by the end of the third quarter.
Philips also said its first quarter results reconfirmed it was on track to achieve its medium-term sales growth target of 5 to 6 percent per year and operating income margin target of between 7 and 10 percent of revenues.
Philips is Europe's biggest consumer electronics maker and also the world's biggest electric shavers maker.
Philips shares, which closed at 26.84 euros on Thursday, are up just over 2 percent this year, underperforming the FTSE European 100 which is up 7 percent as well as technology peers which are up around 10 percent, mainly due to weakness at LG.Philips LCD which represents around 3.5 euros of Philips share price.
The results are the first quarterly earnings of a major technology company after Samsung Electronics posted a bigger-than-expected 25 percent slump in quarterly operating profit on Friday, hit by sliding margins in mobile phones and memory chips, products in which Philips is not a major player.
Philips' flat display supplier LG.Philips LCD, of which it owns 32.9 percent, published weak results and a cautious outlook due to overcapacity and rapidly falling prices for its panels.
Not all technology news has been bad, however. Handset maker Sony Ericsson reported a better than expected quarter on healthy demand for cell phones.
Within Philips' five core business units, lighting performed better than expected with income from operations of 195 million euros against analysts' forecast of 163 million euros.
Medical systems, the main growth engine of the company, disappointed with a 99 million euro operating profit against analyst expectations of 120 million euros. The shortfall was due to higher spending on sales, research and takeover charges.
''The disappointment was not just in one-offs. The 45 million (euro charge at LG.Philips Displays) was offset by gains in other activities. Medical systems have not improved as much as I was expecting,'' said analyst Dinant Wansink at Delta Lloyd Securities.
REUTERS PV SND1432