Technology conglomerate Royal Philips Electronics NV said Monday its fourth-quarter net profit more than doubled due to one-time gains and lower tax costs, even as sales slipped due to weakness at its consumer electronics division.
AMSTERDAM, Netherlands (AP) — Technology conglomerate Royal Philips Electronics NV said Monday its fourth-quarter net profit more than doubled due to one-time gains and lower tax costs, even as sales slipped due to weakness at its consumer electronics division.
Philips, which also makes high-end medical equipment, light bulbs and household appliances, posted a net profit of 680 million euros ($882 million), up from 332 million euros a year earlier, when it paid a one-time tax charge of 240 million euros on shares it holds in Taiwan-based chipmaker TSMC Ltd.
The earnings included an additional one-time gain of 129 million euros ($167 million) from the sale of its semiconductor division, which was bought by a consortium of private investors led by Kohlberg Kravis Roberts & Co. in August. Total proceeds from the sale were 4.3 billion euros ($5.58 billion), with the rest booked in the third quarter.
Fourth-quarter sales fell by less than 1 percent to 8.13 billion euros ($10.6 billion) from 8.19 billion euros—but Philips restated the year-earlier figures from 9.52 billion euros to reflect the sale of the semiconductor division.
Philips’ Chief Executive Gerard Kleisterlee said in a statement that after the sale of the chip division, Philips was entering ”a new period in the company’s history” in which earnings would be less volatile.
”This transaction completed efforts to transform Philips into a stable company built around our brand, with leading market positions in virtually all areas in which it is active,” he said.
Philips shares fell 0.7 percent to 29.17 euros ($37.284) in Amsterdam trading.
Sales dropped 6 percent to 3.26 billion euros ($4.23 billion) at the company’s consumer electronics division, still its largest by sales, ”where focus remains on margin generation,” Philips said. The division reported operating profit up 10 percent to 259 million euros ($336 million).
Philips’ medical division—now its most profitable—reported operating profits up 16 percent to 311 million euros ($404 million), while operating profits at its lighting and household appliance activities both declined slightly.
Kleisterlee called the results ”strong,” though the company cautioned that the consumer electronics division will continue to feel margin pressure as supplies of flat-panel televisions exceed demand.
This was ”of no concern whatsoever” for the company’s financial goals, Kleisterlee told reporters on a conference call. ”Consumer electronics is not the division that makes or breaks Philips.”
The company targets sales growth of 5 percent to 6 percent in 2007, with margins of 7.5 percent.
Philips will buy back 1.6 billion euros ($2.1 billion) of shares in 2007, and plans to increase its dividend policy, aiming for 40 percent to 50 percent of earnings instead of 25 percent to 38 percent.
In concrete terms, the company will propose a dividend of 60 euro cents (77 cents) for 2006, up from 0.44 euros in 2005, Philips said.
Full-year earnings came to 5.38 billion euros ($6.98 billion), up from 2.87 billion euros, including the 4.3 billion euros gain from the semiconductor division sale. Full-year sales rose 6 percent to 27 billion euros ($35 billion)—but semiconductor sales were stripped from that figure.
Amsterdam-based Philips retained a 19.9 percent stake in the semiconductor business. It also owns 33 percent of South Korean LCD panel maker LG.Philips LCD Co. Ltd., and 16 percent of TSMC.
Kleisterlee said Monday he would use any proceeds from selling these stakes for more share buybacks or acquisitions.