Philips Returns to Profit

Profits due to cost cutting and improved performance in emerging markets

Electronics giant Philips reported a huge improvement in underlying performance and switch into net profit in the fourth quarter, but said times were still hard and it would focus on costs and innovation.

Philips reported a 25-fold increase in earnings before interest, tax and amortization (EBITA) of 662 million euros.

This was driven by higher earnings, notably in emerging markets, across all operating sectors -- healthcare, consumer lifestyle and lighting, as well as a 191-million-euro decline in restructuring and acquisition-related charges.

"Thanks to the increased resilience of our company, we ended the year with a strong fourth quarter," Philips chief executive officer Gerard Kleisterlee said, adding he was "confident" of further progress in 2010.

The group, which has already announced 9,000 job cuts, reported a fourth-quarter net profit of 260 million euros (US$368 million.) This was a big turnaround from a loss of 1.17 billion euros in the same period of last year.

Hard-hit by the global economic crisis, Philips announced last January that it would cut 6,000 jobs worldwide, on top of another 3,000 cuts announced in the fourth quarter of 2008, in a bid to shave a combined 600 million euros off spending by 2010.

On Jan. 25 it said total sales for the three months to December stood at $7.26 billion a drop of 5% from a year earlier largely due to foreign exchange factors.

In spite of higher earnings, fourth-quarter cash inflow was 826 million euros lower than 12 months earlier, partly due to a 485-million-euro asbestos-related settlement. Cash flow is a measure of the speed at which a company accumulates cash before, and beyond, making payments of all kinds. A surplus provides room for maneuver in managing current finances and may assist investment.

Net profit for the year totaled 424 million euros, against a net loss of 92 million euros in 2008, with 2009 sales 11% lower at 23 billion euros.

Restructuring costs for 2010 would be in the range of 150 million to 250 million euros, Philips said, adding it expected the upward trend in emerging markets to continue.

The group attributed the turnaround to cost cutting and improved underlying performance notably in emerging markets, but warned that "visibility beyond the short term remains low and so we will continue our focus on cost."

The board said "At the same time, we will ensure that our businesses are well placed to capture growth when it comes, not least by maintaining investments in innovation, marketing and emerging markets."

Copyright Agence France-Presse, 2010

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