Philips' Second-Quarter Profit Leaps on TSMC Stake Sale
Royal Philips Electronics, a maker of medical and lighting equipment, said Monday net profit for the second quarter Monday rose due to a large gain on the sale of a stake in Taiwan Semiconductor Manufacturing.
Net profit was 1.57 billion euros ($2.16 billion), up from 301 million euros a year earlier, while sales fell 4.4% to 6.1 billion euros ($8.4 billion) from 6.38 billion euros.
The company blamed the fall in sales on unfavorable exchange rates and said they would otherwise have been "on par" with a year earlier.
Most notable was an 11% fall in sales at the company's consumer electronics division to 2.15 billion euros ($2.96 billion).
Still, Chief Financial Officer Pierre-Jean Sivignon forecast a rise in consumer electronics sales in the second half of the year, due to the introduction of new products, including a new range of flat panel televisions.
Excluding the 1.22 billion euros ($1.68 billion) gain on the sale of a 4.7% stake in TSMC, operating profit gained 22%, mostly as a consequence of lower overheads.
Consumer electronics remains Philips' best-known and largest division by sales but with an operating profit of 1%, or 21 million euros ($29 million) in the second quarter, it is dwarfed in importance by the more profitable medical and lighting businesses. These businesses posted second-quarter operating profit of 151 million euros ($208 million) and 150 million euros, respectively.
"Philips continued to measure growth where it matters most: in our high-margin divisions," Sivignon said.
However, the medical division's growth continues to suffer from cutbacks to spending in U.S. Medicare and Medicaid programs, Philips said.
Philips' household appliances division, best known for making electric shavers, is also more profitable than the consumer electronics business, with a second quarter operating profit of 80 million euros ($110 million), up from 58 million euros a year ago. That was the best operational growth in the company. Philips attributed it to strong sales of kitchen appliances, especially in developing countries.