Royal Philips Electronics NV reported a fall in third quarter earnings yesterday, reflecting the sale of the company's semiconductor arm a year ago.
Philips said sales and operating profits of its remaining operations were higher, due to growth at its lighting and domestic appliance divisions, and lower overhead costs.
Shares fell the most in more than two years in Amsterdam trading after profit dropped and the company cut its sales forecast for the medical division.
Philips shares fell 2.1 percent to 31.47 euros (US$44.64) in Amsterdam. Before today, the shares were up 13 percent this year, in line with the Amsterdam Exchanges Index.
Net profit was 331 million euros (US$470 million), down from 4.24 billion euros. Last year, Philips sold an 80.1 percent stake in its computer chip division to private equity investors for 6.4 billion euros.
Third quarter sales were 6.52 billion euro, up 3.3 percent from 6.31 billion euros. Philips said operating profit was 385 million euros, up from 25 million euros a year ago.
At Philips' medical equipment division -- which vies with lighting as its most profitable -- operating profits fell 9 percent to 151 million euros, which the company said was due mostly to a decrease in spending on imaging machines by US hospitals.
"The economic situation in North America might cost us...up to 2 percentage points of the 6 percent growth" Philips was originally expecting for the division this year, chief financial officer Pierre-Jean Sivignon warned on a conference call.
Chief executive officer Gerard Kleisterlee sold most of the company's semiconductor assets and reduced the stake in a flat-panel display venture to focus on medical scanners, appliances and lighting.
"If this has to be your growth engine, it's some sort of a problem that it's not doing well," said Corne van Zeijl, who oversees about US$1.48 billion including Philips shares at SNS Asset Management in the Dutch town of Den Bosch. "Investors could be somewhat disappointed in the medical division."
However, Sivignon said the company would still meet an overall financial target of 7.5 percent growth in operating profit for this year, due to strong growth in lighting, which is benefiting from the demand for energy-saving bulbs.
Philips, the worlds largest lighting maker, reported operating profits from lighting grew by more than 40 percent to 178 million euros.
Revenue at the consumer electronics division, which makes televisions and DVD players and is Philips's largest unit, rose 4.7 percent to 2.52 billion euros in the period.
Philips, also Europe's largest maker of televisions, cut its stake in its LG.Philips LCD Co venture to 19.9 percent from 32.9 percent on Oct. 10.
Philips has a "long-term plan to go down to zero or something close to that," Sivignon said, adding the company may "keep a few percentage points."
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