* Q3 EBITA 344 mln euros, nearly double highest forecast
* Cautious for short term
* No structural recovery in majority of end-markets yet
* Shares up 6.9 percent at 1-year high
(Rewrites, adds analyst, CFO comment, updates shares)
By Harro ten Wolde
AMSTERDAM, Oct 12 Philips Electronics (PHG.AS)
(PHG.N) said it had still not seen a recovery in most of its
markets and the Thanksgiving and Christmas holidays would be a
key test of whether shoppers' confidence has returned.
Philips, Europe's biggest consumer electronics producer,
posted better than expected third-quarter results on Monday as
the benefits of cost-cutting took effect and revenue fell less
than feared, boosting its share price to a one-year high.
But the company's outlook was cautious, echoing comments
made by competitors General Electric (GE.N) and Siemens
(SIEGn.DE) that an underlying recovery had not yet begun.
"The proof in the pudding will be the selling season," Chief
Financial Officer Pierre-Jean Sivignon told reporters. "This is
the moment that we can actually see if consumers are there," he
said, adding that the moment of truth would be the Thanksgiving
holiday in the U.S. in November and Christmas the following
Philips, which is also the world's biggest lighting maker
and in the top three for hospital equipment, makes products
ranging from MP3 players and digital photo frames to kettles,
toasters and shavers.
"We remain cautious about the short-term outlook in the
absence of structural recovery in the majority of our
end-markets," Sivignon said.
Hopes that recession-hit consumers will soon start spending
again are high after European August retail sales were not as
bad as expected and U.S. September retail sales rose for the
first time in more than a year [ID:nN08474084] [ID:nL5507872]
Economists however say the jury is still out as there is
continuing pain in the labor market, which will effect consumer
Employment normally doesn't rebound until well after the
recession ends, but is key for consumer spending and debt
repayment to recover, healing the economy and the banks
SHARES HIT NEW HIGH
Philips' third-quarter earnings before interest, tax and
amortisation (EBITA) jumped to 344 million euros ($507 million)
from 57 million euros in the same quarter last year, beating the
average forecast of 109 million euros given in a Reuters poll of
analysts as the effects of cost cutting kicked in.
Philips shares were up 6.9 percent at 18.210 euros by 1330
GMT when the Amsterdam blue chip index .AEX was up 1.6
Sales fell a comparable 11 percent on a year ago to 5.6
billion euros, not as bad as expected, analysts said.
Scott Babka at Morgan Stanley research said all three
divisions posted better organic growth than expected
quarter-on-quarter. "The top-line outperformance largely
reflects a sequential improvement in emerging market sales,
roughly one-third of total Philips sales," he said.
Petercam analyst Eric de Graaf said: "The results look
excellent." He said cost cutting paid off particularly in the
consumer lifestyle unit, noting that the market was still weak.
EBITA at the consumer lifestyle unit rose to 129 million
euros from 63 million last year, beating analysts' average
expectations of 38 million euros.
Philips is in the process of cutting 6,000 jobs this year to
cope with the recession and said all measures were in place to
realise annual cost savings of more than 600 million euros next
Since the third quarter of last year Philips has cut the
number of employees by 9,786, mainly at its healthcare and
Sivignon said he did not exclude additional job cuts in both
units next year, while most of the steps at the consumer
lifestyle division had been taken.
-- For a timeline on Philips' year of turmoil see
-- To see Reuters interview with Phillips CFO Pierre-Jean
Sivignon, click on: link.reuters.com/dym33f
(Editing by Greg Mahlich and Erica Billingham)