Philips says won't meet targets, shares slip
AMSTERDAM (Reuters) - Philips Electronics said on Thursday it did not expect to meet its mid-term profit target as market conditions for its Consumer Lifestyle and parts of its Lighting units were deteriorating.
"The downturn we see now is without recent comparison and is developing much faster and deeper than expected," Philips' Chief Executive Officer Gerard Kleisterlee said in a statement released ahead of an analyst day.
Philips (PHG.AS)(PHG.N) is targeting average annual sales growth of 6 percent until 2010 and a margin on earnings before interest, tax and amortization (EBITA) of 10 to 11 percent.
The company said it would take additional measures to reduce costs and protect margins, resulting in additional charges of around 110 million euros ($139 million) and bringing total restructuring charges for the fourth quarter to 340 million euros.
Philips shares, which have lost 55 percent so far this year, were down 0.4 percent at 13.15 euros at 0834 GMT (3:34 a.m. EST), having been as low as 12.23 euros, underperforming the DJ Stoxx 50 index , which was up 0.25 percent.
"It is not unexpected in this market. Still the news is a pretty great blow to investors," said Theodoor Gilissen analyst Tom Muller.
DETERIORATING CONDITIONS
Philips said that since the end of the third quarter it had felt trading conditions deteriorating in its consumer, construction and automotive markets.
The world's biggest lighting maker, a top three hospital equipment maker and Europe's biggest consumer electronics producer, said in October its consumer business felt the impact of slowing economies, particularly in North America and Europe.
There it generates the bulk of revenue from products ranging from MP3 players and digital photo frames to water kettles, toasters and shavers.
Philips will take non-cash writedowns on the value of remaining stakes in LG Display (034220.KS) and NXP NXP.UL of about 1.1 billion euros in the last three months of 2008.
NXP was spun off from Philips in 2006 and is majority-owned by a private equity consortium including KKR KKR.UL.
In September, NXP announced major cuts in manufacturing, back office and research and development, which could result in 4,500 job cuts, or 15 percent of its workforce.
(Additional reporting by Reed Stevenson, editing by Will Waterman)
