Philips back in black in 2003
AMSTERDAM, Netherlands (Reuters) -- Philips Electronics said on Tuesday it returned to the black in 2003, with net profit well up on forecasts, boosting its shares as it expressed cautious optimism for 2004.
Europe's biggest producer of consumer electronics and lighting, and number three in semiconductors, booked a full-year net profit of 695 million euros ($885 million), much stronger than the 537 million estimated in a Reuters poll of 16 analysts, and following its 3.2 billion euro record loss of 2002.
It said its recovery was aided by 1.1 billion euros of cost savings over 2003, some 100 million more than targeted, and strong Christmas sales. It benefited from a lower than expected tax bill and a strong profit contribution from unconsolidated companies in Asia which make chips and flat displays.
The company reported a full-year operating profit of 488 million euros, falling short of expectations of 542 million. Philips blamed a lower level of sales of businesses and real estate and higher pension costs.
Hurt by the weak dollar, full year sales dropped to 29.04 billion euros from 31.82 billion, but came in above expectations of 28.44 billion on booming chip and consumer electronics sales.
Philips hoped for an easier and better 2004.
"Our task is to maintain this momentum while steadily improving our earnings as we move through 2004. We're better than ever positioned to deliver on our targets," Chief Executive Gerard Kleisterlee told a news conference, adding he targeted revenues of more than 30 billion euros in 2004.
Despite the absence of an outlook for the traditionally weak first quarter, investors drew comfort from Philips' pledge to return to an overall operating margin of between seven and 10 percent within two to three years.
"Philips reported 'blow-out' figures and presented a very good perspective for the future," said asset manager Rob Koenders at Eureffect, who has a 30 euro target for the shares.
"There is a lot more positive than negative in these figures. They took a lot of charges, but they now look ready for the upturn," said analyst Marc Kennis at Van Lanschot Bankiers.
Semiconductors profitable
As Philips had promised, the semiconductor unit, which makes chips for mobile phones from Samsung and Nokia, returned to profit after almost three years and over two billion euros of losses.
The unit's operating income of 166 million euros in the fourth quarter was far better than the average 40 million euros analysts had expected. Factory capacity utilization was 84 percent in the fourth quarter, up from 69 percent in the third, after Philips shut two sites and benefited from demand recovery.
Kleisterlee said the unit would increase 2004 sales in line with or faster than an expected 20 percent rise of the global market.
The company which invented the compact cassette and co-invented the compact disc and DVD booked an overall operating profit of 608 million euros in the fourth quarter, traditionally Philips's strongest, which was 142 million higher than expected.
It benefited from demand for its televisions and shavers and year-end purchases by hospitals of medical equipment.
The main five units were all profitable in the fourth quarter, for the first time in years.
Domestic Appliances -- coffee machines to electric tooth brushes -- achieved a 21.3 percent margin, while that in Lighting slipped slightly to 13 percent.
Medical Systems' operating profit margin dropped to 3.9 percent as it booked a 139 million euro impairment charge on MedQuist.
"But underlying profit was strong. I'm not concerned," said analyst Bert Siebrand at Bank Oyens & Van Eeghen. The vastly expanded Medical Systems unit was on target to meet its 14 percent core profit margin target for 2004, Philips said.
Operating margins at Consumer Electronics and Semiconductors came in much higher than expected at 8.1 and 11.1 percent respectively, on the back of a strong Christmas season.
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