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Philips profits on flat-TVs, chips

Royal Philips Electronics NV, Europe's largest consumer-electronics maker, posted a fourth straight quarterly profit on increased sales of flat-screen displays and semiconductors used in cellphones.

First-quarter net income was 550 million euros (US$664 million) compared with a loss of 69 million euros a year earlier. Philips sales will rise 5 percent to 10 percent on a comparable basis this year, helped by surging semiconductor sales, chief financial officer Jan Hommen said on a conference call.

Chief executive officer Gerard Kleisterlee has managed to make Philip's units profitable, mainly by cutting costs and shedding more than a fifth of the workforce, and last year reported Philips's first annual profit since taking over in 2001.

He's now focusing on raising the Amsterdam-based company's sales of flat screens, DVD recorders and chips. Still, some investors are concerned sales aren't picking up fast enough.

"LCD gave them a good quarter -- semiconductors, medical and domestic appliances were not as good as I was expecting," said Duco Frie at Nyenburgh Asset Management in Amsterdam, which oversees about US$175 million, including Philips stock.

First-quarter sales rose 2 percent to 6.63 billion euros from 6.5 billion euros, held back by the drop in the dollar.

"Our results and our order books indicate that the company is on a more stable footing now, and we should see this trend continue" through this year, Kleisterlee said in the release. This year, "we'll need to begin gradually shifting the emphasis from repairing and regrouping, to building and expanding."

All five divisions -- lighting, medical systems, semiconductors, domestic appliances and consumer electronics -- posting operating profits for the second straight quarter. Philips makes electric shavers, coffee machines, and vacuum cleaners. It's also the world's biggest maker of light bulbs.

Sales of flat screens used in televisions and computer monitors, where Philips's LG.Philips LCD Co. venture is the global market leader, are helping earnings recover. Asian competition in electronics, lower semiconductor sales and a drop in the dollar against the euro had hurt revenue and earnings.

"Our balance sheet is in excellent shape," Hommen said.

He said acquisitions are not a priority and Philips will post a profit for all of this year.

The LG.Philips LCD venture with South Korea's LG Electronics Inc and competitors including Samsung Electronics Co have benefited as consumers switch to flat screens from bulkier, traditional glass-tube TVs and computer monitors.

LG.Philips LCD, based in Seoul, added 215 million euros to Philips's first-quarter net income.

By contrast, rising LCD sales led to a drop in sales at LG Philips Displays Co, another venture between LG and Philips and the world's largest maker of traditional cathode-ray tubes used in TVs.

Philips's semiconductor business, whose clients include Nokia Oyj and Sony Corp, had an operating profit of 75 million euros, compared with a loss of 178 million euros a year earlier, as sales rose 16 percent to 1.3 billion euros on higher demand for chips used in mobile phones and flat-screen TVs. From the previous quarter, sales fell 5 percent in US dollar terms.

Second-quarter chip revenue, also in dollar terms, will gain about 5 percent from the first three months, Hommen said.

For all of this year, sales on that basis are seen growing "at least" 20 percent this year.
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