Philips Nervous About Future | The Mesh Report

Philips Nervous About Future

the Mesh Report Staff October 18, 2010 0

Parmy Olson

LONDON — Despite the thousands of people who will probably buy its electronic shavers as Christmas presents this year, electronics behemoth Philips Electronics is cautious about its sales in the fourth quarter in the midst of lingering economic uncertainty.

Shares of Philips dropped by 4% to 22.92 euros in Amsterdam on Monday morning, even as the company reported that its third-quarter net profit had tripled (rising by 197%) to 524 million euros ($730 million) from last year, beating analysts expectations.

Investors chose to focus on the outlook given by Philips, which sells medical equipment, consumer electronics and is the world’s biggest lighting maker. Outgoing Chief Executive Gerard Kleisterlee said Monday’s figures came amidst “a still fragile economic environment, with weak consumer markets in the developed economies.”

The company added that while the fourth quarter would benefit as usual from the boost in seasonal sales, that would be offset by inventory destocking by its customers and a continued softening of the construction sector. “We take a cautious view on revenue development in Q4 2010,” it said, adding that it reiterated its target for a 10% EBITDA margin.

In Monday’s conference call, chief financial officer Pierre-Jean Sivignon said that many uncertainties remained over healthcare reform in the Untied States and also pointed to the fragility of consumer confidence in Western Europe and the U.S.

He later told CNBC that consumer confidence was “scattered,” which, he said, largely explained the company’s caution.

Philips’ biggest competitors include the lighting and electronics divisions of General Electric ( GE – news -people ) and Siemens ( SI- news – people ).

The company booked a one-off gain of 154 million euros ($214 million) from selling its remaining stake in NXP Semiconductors, a company that was previously Philips Semiconductor but, which Philips Electronics ( PHGFF – news – people ) sold to private equity firms Bain Capital and Apax Partners in 2006.

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