Royal Philips Electronics NV, the world's biggest lighting maker, on Monday reported net profit rose 79 percent in the fourth quarter, less than analysts had expected, as cost-cutting and shifts in currency values made up for weak sales.
The company reported net profit of 465 million euros ($632 million) or euro0.49 per share, up from 260 million euros. Sales rose 1.6 percent to 7.39 billion euros from a year ago — but they would have fallen by 4 percent stripping out the impact of currency effects.
"We rebounded strongly ... within the constraints of an economy that remained weak, with fragile consumer confidence in most mature markets," Chief Executive Gerard Kleisterlee said in a statement. "Television profitability, however, remained a major issue that we are committed to resolve."
Sales at Philips' consumer products division fell by 7.2 percent and operating profit fell 47 percent to 137 million euros, due mostly to ongoing weakness at its television-making arm. The division also makes a wide range of consumer products including electric shavers, toothbrushes, and coffee machines, among others. Philips said TV sales remain weak and a licensing deal with TPV Technology to manage Philips-branded television sales in China was delayed. It also cited falling sales of audio and video equipment.
Shares fell 4.9 percent to 23.36 euros in early Amsterdam trading.
"We are clearly disappointed by fourth quarter results," said ING bank analyst Sjoerd Ummels in a note, saying sales growth outside of acquisitions was worse than he expected.
"Philips' outlook is supportive as far as lighting and health care are concerned, yet the firm warns for continued suppressed consumer confidence."
ING rates Philips shares a Buy.
Philips said its lighting sales, which were about flat from a year ago, benefited from strong Asian and modest U.S. growth, countered by poor demand in Western Europe. Philips has been one of the key beneficiaries of demand for energy-saving bulbs, including the now fast-growing market for LED lights. Operating profits at the division more than tripled to 156 million euros from 41 million euros.
Sales at Philips healthcare arm — which makes high-end medical imaging equipment and is currently the company's most profitable business — rose by 9.5 percent. Operating profits were up 17 percent to 459 million euros.
The company noted that healthcare equipment order intake in the U.S. was strong, which it said bodes well for that segment in 2011.
In 2011 "we expect emerging markets to continue to support growth in all three sectors while consumer sentiment in mature markets remains subdued" the company said.
Philips held 1.2 billion euros in net cash at the end of the quarter. It has 119,000 employees worldwide, up about 3,000 from a year ago.
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