Philips boasts solid Q3
But LCDs, consumer electronics are tough
Third quarter net income at Dutch conglomerate Philips was up by over €1bn ($1.2bn) - thanks mainly to the IPOs of Navteq and LG Philips LCD.
In the three months to the end of September, net income was €1.17bn ($1.44bn), or €0.92 ($1.13) a share, compared with net income of €124m ($153m), or €0.10 ($0.12) a share, in the same period last year. Initial public offerings (IPOs) of Navteq Corp in August and LG Philips LCD in July helped boost net income by €743m ($915m).
Sales during the quarter were up three per cent to €7.23bn ($8.9bn). The firm said the weak dollar had a five per cent downward effect on revenues.
"Q3 was another solid quarter for Philips, with results improving across a broad front," said Gerard Kleisterlee, Philips' president and CEO. "In fact, we would be pleased if it were not for Consumer Electronics, where product margins, especially in Flat TV and DVD+RW, came under heavy pressure in a highly competitive consumer market. These tough market conditions make the quick recovery of margins in Domestic Appliances and Personal Care look even more impressive." Medical systems, lighting and semiconductors also performed well in terms of product innovation and operating efficiency, he said.
Cash flow from operating activities came to €292m ($359.5m), compared to €376m ($493m) in the third quarter a year earlier. Inventory as a percentage of sales held steady at 13.4 per cent.
LG Philips LCD disappoints
At LG Philips LCD, third quarter net income came to KRW291bn ($252.6m), down from KRW343bn ($297.6m) a year earlier. Revenue rose 12 per cent to KRW1.875 trillion ($1.6bn).
The firm blamed its declining fortunes - which come after about a year of relative stability in the sector - on falling prices for the liquid crystal displays (LCDs) it manufactures. Average selling prices were down 20 per cent compared to Q2, and were down almost nine per cent compared to a year ago. Worse still, prices will fall further in coming months.
"While we experienced greater than expected pricing declines during the quarter, we believe these declines should lead to increased acceptance and sales in the global TV market," commented Chief Financial Officer Ron Wirahadiraksa. "Furthermore, we believe that LG Philips LCD is well positioned to capture market share and to grow our customer relationships. Our funding position has strengthened considerably due to the IPO proceeds and to strong cash-flow from operations."
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