Philips Reports Q1 CE Sales Rose 3%

AMSTERDAM, THE NETHERLANDS— Improved sales in both its set-top box and mobile communications businesses helped the consumer electronics segment at Philips Group increase first quarter sales by 3 percent, climbing to $2.4 billion, compared with $2.3 billion in the year-ago period.

However, CE segment first quarter operating income dropped to $71.2 million, down from $88.1 million year-on-year.

Yet Philips continues to attack its CE profitability problems. "In our consumer electronics business (excluding licenses), achieving full-year profitability remains a top priority," said Gerard Kleisterlee, president/CEO of Royal Philips. This effort includes taking out $482.9 million from the CE division's cost structure by the end of 2005, he said.

"By playing a leadership role in new key product categories, such as high-end flat TVs and DVD+RW, our goal is profitable growth in the business," Kleisterlee emphasized.

In relation to overall Philips Group first-quarter business, ended March 31, both strong sales growth in consumer electronics and semiconductors helped boost consolidated sales 2 percent, hitting $8 billion, up from $7.8 billion in the same quarter in 2003.

Philips moved into the black in the first quarter, registering consolidated net income of $664 million, compared with a net loss of $83.3 million in the first quarter last year.

One of the strong suits in Philips' first quarter numbers is financial results from the LG.Philips LCD joint venture, which enjoyed a 94 percent sales increase during the period to $1.8 billion from $928.3 million in the same three months last year.

Net income for Philips' 50 percent share of the joint venture with South Korean CE and major appliance maker LG Electronics moved into the black in the first quarter, hitting $259.5 million, compared with a loss of $20.5 million the previous year.

Contributing to LG.Philips' growth was continued sequential-quarter improvement in the LCD market, with quarterly sequential sales increasing 3 percent in U.S. dollar terms, but down 3 percent in euros, due to a weaker exchange rate.

Average large-panel prices increased 6 percent in U.S. dollars in the first quarter over the same level at the end of 2003. Total panel shipments slipped 5 percent from the fourth quarter of last year, with large panel shipments for the quarter surpassing 6 million units.

Sales in the United States dropped to $1.8 billion in the first quarter, down from $2 billion in the same three months a year earlier. The 9 percent nominal decrease was due to the weaker U.S. dollar, which had a downward effect of 14 percent. Philips said its U.S. business was not profitable in the first quarter, and that it expected to attain profitability for the year. The company said it is looking for strong CE sales in the second three months.