AMSTERDAM (Reuters) ? Philips Electronics (PHG.AS) warned of soft fourth quarter profits due to weakness in European markets that is leading to charges for inventory it cannot shift.
The Dutch group - Europe's biggest consumer electronics maker and the world number one in lighting equipment - said it will report a fall in underlying earnings to about 500 mln euros from 910 mln a year earlier, slowing sales growth across its divisions and unspecified charges for stock that is still sitting in its warehouses.
"Our expected fourth-quarter financial results have been affected by the weakness in Europe, which has impacted our Healthcare business, as well as pricing in our Consumer Lighting business," Chief Executive Frans van Houten said.
The shares were hit hard by the profit warning, falling 6.4 percent by 0745 GMT, while the main AEX index was up 0.5 percent.
The latest warning follows a prediction in June of sharply lower profits at the lighting division, its biggest alongside healthcare equipment, due to weak consumer demand in Europe. That was just a few months after Van Houten took the helm.
Philips said overall sales growth in the fourth quarter will probably come in at less than 5 percent and the underlying profit margin is now expected to be 8-9 percent, below an estimate from SNS Securities analysts of 11 percent and down from the 11.4 percent the firm reported a year earlier.
Despite a strong performance in the U.S., the healthcare division will report fourth-quarter sales growth in the low single digits, primarily due to weak sales in Europe and delivery delays.
The lighting division continues to have "operational issues," Philips said, which combined with weak macroeconomic factors will lead to charges in the fourth-quarter for inventory.
"Results in Healthcare and Lighting are disappointing, especially as it is explained by difficult markets in Europe which are not likely to improve in the near term," said SNS analyst Victor Bareno.
Petercam analyst Marcel Actherberg was disappointed with lower than expected margins for the fourth quarter, particularly in the lighting division.
Philips said on Tuesday that with continued cost cutting and restructuring it still expects to meet its 2013 mid-term financial targets of 4-6 percent sales growth, 10-12 percent underlying earnings growth and a 12-14 percent return on capital.
The group announced a massive restructuring plan in October when it reported disappointing third-quarter numbers.
Philips said at the time it would aim to cut 4,500 jobs as part of the restructuring to boost profit and meet its financial targets. That is about 3.7 percent of its workforce outside the television business of just over 120,000, which had already been reduced by a 2009 program to cut 6,000 jobs.
Philips is set to report fourth-quarter results on January 30.
(Reporting By Roberta B. Cowan; Editing by Chris Wickham and Dan Lalor)
Source: http://us.rd.yahoo.com/dailynews/rss/eurobiz/*http%3A//news.yahoo.com/s/nm/20120110/bs_nm/us_philips
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