Philips shares slump over weak 1st-quarter profits

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Associated Press

Posted on April 22, 2014 at 12:03 AM

Updated Tuesday, Apr 22 at 7:07 AM

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 — including for expensive new LED light bulbs.

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 lights, which have greater energy efficiency and last longer but are much pricier per bulb. This can discourage sales to customers used to cheaper 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."

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