The Wall Street Journal-20080122-Philips Posts Strong Earnings As It Blends In Acquisitions
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Philips Posts Strong Earnings As It Blends In Acquisitions
Philips Electronics NV posted strong profit for the fourth quarter, fueled by asset sales, but it faces new challenges as consumer spending slows in a global economic downturn.
The Amsterdam-based company -- which sells lighting, consumer electronics and medical equipment -- didn't give a specific forecast for 2008, but said it planned to deliver growth and improved margins in the coming year. Chief Executive Gerard Kleisterlee said in an interview that the company's strong balance sheet, broad product portfolio and presence in emerging markets should help it withstand a slowdown in the U.S. and Europe.
"The health-care sector has been fairly resilient in earlier downturns, and lighting has also done remarkably well," Mr. Kleisterlee said. "We cannot be shielded completely from macroeconomic developments, but we have a portfolio of products that puts us in a good position to cope with it."
Philips's medical unit, which sells large equipment such as X-ray and MRI machines to hospitals, is still recovering from a stumble in the U.S. market. Analysts will be monitoring performance in the home- appliance and consumer-electronics divisions in coming quarters.
Mr. Kleisterlee said Philips would slow acquisitions this year to concentrate more on integrating companies it recently bought. Philips spent 6.2 billion euros ($9.06 billion) on acquisitions last year, among them the $2.7 billion purchase of Genlyte Group Inc., a U.S. lighting-fixtures maker. In December it announced plans to buy U.S.- based Respironics Inc., which makes sleep and respiratory products for home use, for 3.6 billion euros. "Integration will be a big task in the first half," he said. "We have to make sure we generate the returns to justify these investments to shareholders. We'll continue to scout the market for attractive opportunities but that is a secondary task to integration."
Philips said fourth-quarter net income rose to 1.39 billion euros, or 1.30 euros a share, from 680 million euros, or 59 European cents a share, a year earlier, helped by a gain of 1.09 billion euros from the sale of stakes in LG Philips LCD Co. and Taiwan Semiconductor Manufacturing Co. Fourth-quarter sales rose 3.8% to 8.37 billion euros, up from 8.06 billion euros a year earlier.
