Philips posts Q4 loss, sees no recovery in 2002

Koninklijke Philips Electronics NV reported a fourth-quarter net loss on Thursday, and a record net loss for its 2001 fiscal year. The company doesn't see the market picking up in 2002.

The fourth-quarter net loss amounted to €1.14 billion (A$1.87 billion as of Dec. 31, the last day of the period being reported) compared with a net profit of €2.79 billion in the year-ago period, Philips said.

Excluding €959 million in restructuring and impairment charges, the quarter's loss was €182 million, compared with a net profit, excluding special gains of €2.13 billion, of €664 million in the last quarter of 2000, Philips said.

Sales in the fourth quarter dropped 16 percent on the year to €9.26 billion. Semiconductors, components and mainstream consumer electronics suffered most from the downturn in their markets, while the less cyclical business units, such as lighting and domestic appliances, showed solid performance, Philips said.

For the full year, Philips reported a record net loss of €2.6 billion, its first full-year net loss since 1996 and in sharp contrast with a record €9.6 billion profit in 2000. Sales in the year fell 15 percent to €32.34 billion, which Philips says is in line with the worldwide economic slowdown and the slump in the IT and mobile-phone industries.

Philips disappointed analysts, who had expected a net loss of about €2.2 billion for the year, according to one analyst at Friesland Bank Securities NV.

The company also failed to meet its own forecast. At the end of the third quarter, it predicted an annual net loss before charges of about €600 million. However, the full-year loss before charges totalled €908 million. In 2000, the company reported a €2.83 billion profit for the full year, the company said.

The components sector reported sales for the quarter of €575 million, down 54 percent year on year. About half of the decline is attributable to the spin-off of part of the division. While sales of mobile phone displays and optical storage products are down compared to the year-ago quarter, they rose compared to the previous consecutive quarter, Philips said.

Semiconductor sales, at €940 million, are down 44 percent from the year-ago quarter, a drop in line with the market, Philips said. But quarter on quarter they rose 5 percent, due to increased demand for the chips used in mobile phones and consumer electronics, Philips said.

Sagging demand pushed sales at Philips Consumer Electronics down 19 percent year on year to €3.25 billion. Sales of mainstream consumer electronics, such as video recorders and stereo systems, were down in all regions except Europe.

In response to the bitter market conditions, Philips cut 18,600 jobs in the past year. The company also moved its CRT (cathode ray tube) and LCD (liquid crystal display) business into a loss making joint venture with South-Korea's LG Electronics Inc., cut back on the production of mobile phones and outsourced manufacturing of VCRs.

Philips does not see markets strengthening in 2002, although the Dutch electronics maker believes the "severe decline" in the IT and telecommunication market has come to a halt. Financial improvements in 2002 will come mainly from cost reductions, efficiency improvements and restructuring programs, as well as portfolio management, Philips said.

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Joris Evers

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