Philips warns on profits due to weak Europe

Tue Jan 10, 2012 9:29am EST
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By Roberta Cowan

AMSTERDAM (Reuters) - Philips Electronics NV warned of soft fourth quarter profits due to weak European consumer markets that is leading to charges for inventory it cannot shift.

Europe's biggest consumer electronics maker said it will report a fall in underlying fourth quarter earnings to about 500 mln euros from 910 mln a year earlier.

The earnings report, due at the end of January, would also show slowing sales growth across its biggest divisions and unspecified charges for products that are still sitting in its warehouses.

"Our expected fourth-quarter financial results have been affected by the weakness in Europe, which has impacted our healthcare business, as well as pricing in our consumer lighting business," Chief Executive Frans van Houten said on Tuesday.

Government austerity programs in Europe are squeezing hospital budgets and some have put orders for the latest equipment on hold.

Petercam analyst Marcel Achterberg said the excess inventory problem the lighting business is facing indicates that consumer spending is indeed slowing down in Europe.

The shares were hit hard by the profit warning, down 4.3 percent at 1034 GMT, while the main AEX index was up 1.4 percent.

The latest warning follows a prediction in June of sharply lower profits at the lighting division, its biggest alongside healthcare equipment, due to weak consumer demand in Europe and problems caused by crisis-hit construction markets. That was just a few months after Van Houten took the helm.   Continued...