Tue, Jul 19, 2011 - Page 10 News List

Philips plans more cost cuts after 1.34 billion euro loss

Bloomberg

Royal Philips Electronics NV plans to cut an additional 500 million euros (US$703.8 million) in costs after reporting its biggest loss in almost a decade and predicting no improvement to its performance in the near term.

The savings will help improve margins from 2013, the Amsterdam-based company said yesterday.

Earnings before interest, taxes and amortization in the second quarter fell to a two-year low of 370 million euros from 506 million euros. Analysts in a survey predicted 304 million euros.

Philips booked a net loss of 1.34 billion euros after writing down the value of assets.

“Our second-quarter results were impacted by near-term operational challenges, weaker markets and a significant impairment charge,” Philips CEO Frans van Houten said in the statement.

The pledge to cut costs marks van Houten’s attempt to accelerate Philips’ recovery after completing his first 100 days at the helm.

The CEO announced a 2 billion euro share buyback program yesterday, and Philips wrote down the value of healthcare and lighting assets.

The company faces declining demand and earnings from lighting and basic consumer electrical goods amid mounting competition from lower-cost Asian manufacturers.

Philips aims to update 2015 goals in October to reflect an overhaul of the company that involves exiting TV operations. By 2013, sales will advance 4 percent to 6 percent, and Philips predicted the margin on earnings before interest, tax and amortization of as much as 12 percent by then.

Van Houten became CEO in April and he is using additional cutbacks to offset an additional 200 million euros in expenses related to sales and research and development.

The company predicted 30 million euros in restructuring and purchase-related costs in the third quarter.

Philips is bundling its TVs, which it first produced in 1928, into a partnership that will be 70 percent owned by Hong Kong-based TPV Technology Ltd (冠捷), joining European conglomerates including Siemens AG scaling back consumer electronics as prices decline.

Rival Toshiba Corp announced the transfer of its LCD TV production site for the North American and Mexican markets to Taiwan’s Compal Electronics Inc (仁寶) last week.

Philips already cut 6,000 jobs to defend margins as the financial crisis lowered demand for products.

The Vision 2015 targets set out last year that are currently on hold included a margin goal of 10 percent to 13 percent.

The company did not specify in yesterday’s release if the savings plan includes job cuts.

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