Philips shares slump over weak 1st-quarter profits
AMSTERDAM (AP) — Shares in Royal Philips, the world’s leading light maker, slumped Tuesday after the Dutch company reported a drop in first-quarter profits blamed partly on sluggish sales of its health care products and consumer lights.
Philips said its net profit for the January-March period was 138 million euros ($190.5 million), 14 percent lower than for the same quarter of 2013. Sales fell 4.8 percent to 5.02 billion euros ($6.9 billion).
The Amsterdam-based company said profit margins worsened partly because of paying laid-off workers. The company cut about 3,800 jobs over the past year and now employs 114,300.
Chief executive Frans van Houten cited negative “market headwinds” in Russia and China, and said the euro currency’s strength also hurt the bottom line.
Van Houten forecast a “challenging year” ahead.
Philips shares fell 6.7 percent to 23.27 euros ($32.15) in midday trading.
Among its major divisions, Philips said lighting sales were flat, health care equipment and services revenues declined 2 percent, and sales of consumer appliances such as shavers and coffee makers rose 7 percent.
Philips’ lighting division has shifted production to LED and energy-saving bulbs that last longer but are pricier per light. Revenues from the sale of LED lights surged 37 percent versus the first quarter of 2013, and now represent a third of the company’s lighting sales. However, overall lighting sales were flat as sales fell for other types of lights, notably incandescent bulbs.
Chief financial officer Ron Wirahadiraksa told analysts the decline in consumer purchases was led by Western Europe “where, with few exceptions, the market continues to be sluggish.”
Philips has been selling do-it-yourself kits for home enthusiasts who wish to control their home lighting systems over a network, a potential area of growth.
The performance of Philips’ health care division also was mixed. Sales of high-end imaging equipment declined, while sales of systems for networking patient monitoring grew strongly.
Analysts at Killik & Co said the results reflected “weaker performances in the lighting and health care businesses than forecast, and weak performances in Western Europe and North America.”