Philips in Good Stead - Analyst Blog

Royal Philips Electronics(PHG) posted revenues of €7.4 billion ($10 billion) for the fourth quarter of 2010 with earnings per share at €0.49 (66 cents). 

Healthcare sales increased by 2% and were helped by robust performance at Home Healthcare Solutions but tempered by weak performance at Imaging Systems . Consumer Lifestyle sales declined by 11% due to Television, while there was growth in Health & Wellness. Lighting sales were flat compared to the prior year driven by LED and Lighting Systems & Controls offset by Consumer business.

Improved business prospects in North America were offset by sales decline in Wetern Europe. Emerging markets saw a 1% comparable decline in sales due to weakness in Brazil. Excluding Brazil, sales in emerging markets went up by 7%.

Earnings before Interest, Tax and Amortization (EBITA) increased by €211 million compared to 4Q09. This was due to profitability improvements in GM& S and Lighting and a decline in restructuring and acquisition-related charges.

Operating cash flow was €1,558 million. The cash balance at the end of the quarter was €5.83 billion mainly because of free cash inflow of €726 million.

Inventories as a percentage of sales were 1.2% lower than in 3Q09 representing €3.9 billion. This was attributable to Consumer Lifestyle and Healthcare.

At the end of the quarter, Philips had net cash of €1.2 billion, which is a substantial improvement from the prior quarter.

The number of employees increased by 1,377 in 4Q10 due to increases at Lighting and Healthcare, partly offset by Consumer Lifestyle.

The restructuring of the product portfolio of Philips to better position itself as a more focused company in the healthcare, lighting and lifestyle markets is moving ahead with several acquisitions and divestments. This bodes well for the company going forward.

Philips announced the acquisition of street lighting control activities of Amplex A/S, a Denmark-based provider of energy-friendly infrastructure solutions.

The company expects comparable sales growth in the first of 2011 to moderate towards the single-digit level, the normalization being driven by slow recovery in U.S. and Europe as well as the seasonality of the television business.

Headquartered in Amsterdam, The Netherlands, Koninklijke Philips Electronics N.V. is one of the world's largest electronics companies and the biggest in Europe, with sales of €25.4 billion in the full year 2010.

Recently, General Electric Company (GE), a competitor of Philips, beat street's view by posting solid results for FY2010.

 We currently have a 'Neutral' recommendation on PHG.

 
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