Philips restructuring efforts trigger 27% fall in profits

Philips suffered a 27 per cent drop in pre-tax profit as restructuring charges bit in the wake of turnround efforts at the Dutch electronics group.

First-quarter net profit fell from €137m to €100m year-on-year as acquisition and turnround costs crept up. In total, Philips spent €58m on restructuring and buyout expenses - up 13 per cent from the year before.

There was better news on the top line as Philips posted the first rise in like-for-like sales in more than a year, thanks to improved performance in its consumer and healthcare businesses. Sales in Philips' healthcare division rose 1 per cent - well above the 3 per cent drop pencilled in by analysts - while consumer sales posted a 10 per cent jump in revenues, which was more than double analysts' expectations.

"We are encouraged by the resumption of sales growth," said chief executive Frans van Houten. "We saw positive order-intake growth, despite the continued challenging healthcare market environment."

Operating margins in Philips key healthcare division fell sharply from 8.8 per cent to 5.4 per cent due to acquisition costs. Last year, Philips announced plans to buy US medical devices group Volcano for €800m.

In total, earnings before interest, tax and amortisation came in at €327m for the three months to 31 March - slightly below the €340m expected by analysts.

Shares in Philips fell 4 per cent to 26.51, coming off their recent year-long high.

Philips is in the midst of spinning off its lighting division to focus instead on its healthcare and consumer division, which makes everything from toothbrushes to hospital scanners.

The plan to have an initial public offering of its lighting division will mark the end of an era for the group, which started as a maker of lightbulbs in Eindhoven in 1891.

It marks the latest in a series of disposals over the past few decades, which has seen Philips slim down from a conglomerate making everything from televisions to toasters into one focused increasingly on specialised healthcare technology.

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