MARKETS
Philips starts 2002 in the black
16-04-2002
by Paula Mythen
In a surprise to analysts, Dutch electronics giant Philips reported a Q1 net profit of EUR9 million, after a series of loss-making quarters.
The profits equate to EUR0.01 on a per share basis and compare to profits of EUR93 million or EUR0.07 per share in the first quarter of 2001. And while the profits are less than a tenth of last year's figures, they represent a dramatic improvement from the fourth quarter of 2001 when the company reported a net loss of EUR182 million.
Sales in the first quarter of 2002 came to EUR7.6 billion, a decrease of seven percent over a year ago. Income from operations for the first quarter of 2002 came to a profit of EUR73 million and included special items totalling a positive EUR58 million. Income from operations, when adjusted for special items and amortisation of goodwill, decreased from EUR410 million in 2001 to EUR15 million in 2002.
"It seems that the worst slump in recent business history is behind us now, and that we begin to see the start of a new upturn in the business cycle," said Gerard Kleisterlee, Philips' president and chief executive officer. "We are encouraged by the improved performance in many of our businesses, especially in semiconductors and components, supported by a record Q1 performance at DAP (domestic appliances), strong sales growth at medical systems, and good performance at CE (consumer electronics) in Europe."
The company's cost reduction programs, including thousands of job cuts, have so far created annualised savings of approximately EUR130 million while higher pension costs negatively affected group income from operations in the first quarter with approximately EUR150 million.
"Our cost reduction programs are beginning to pay off and should pick-up speed in the second half of the year, when the cost synergies at medical systems start to make an impact," said Kleisterlee. "Our balance sheet provides us with a solid foundation for the transformation Philips is undergoing, and through strict capital management and diligent control of costs and investments, we plan to keep it strong."
The company provided a generally positive outlook saying that some of its markets are strengthening, and economic conditions around the world are gradually improving. On a sector basis, Philips envisages that the semiconductor and components divisions will show further improvements.
Earlier this month Philips along with ST Microelectronics and Motorola announced an investment of USD1.4 billion over four years to build a new microchip production and development facility in France.
At the end of March 2002, the number of Philips employees globally was 186,090, a decrease of 2,553 since December 2001. In Ireland Philips employs around 510, with 290 employees working in accounting or marketing and the remainder in the company's silicon and software systems division.
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