Two thirds of Philips' profit evaporated

Profit dropped two thirds in fourth quarter

Philips had a 2 % turnover drop (adjusted for exchange rate fluctuations) in its fourth quarter, down to 6.54 billion euro. Disappointing sales in its medical equipment division and in emerging markets like China and Russia were mostly to blame. Its health and lighting divisions experienced 3 % turnover drops, while its consumer electronics’s turnover grew 6 %.

Net profit got hammered in the fourth quarter, from 412 million euro in 2013’s fourth quarter to 134 million euro now – a 67 % drop. The company had issued a warning earlier this month that the ailing Cleveland factory, which creates expensive scanning equipment, would hugely impact the numbers. The biggest issue there was that it apparently has had a faulty quality assurance for several years, something which has been remedied now, but which will also impact this year’s numbers.

“Reform is marathon, not a sprint”

Disappointing sales in the previous quarter ends an abysmal year for Philips. It may have limited its full-year turnover drop to – 1 % (to 21.4 billion euro), its net profit received a devastating blow (- 66 % to 411 million euro).

CEO Frans van Houten is careful when talking about 2015: he predicts higher sales and better profit margins, but is still hesitant about the economy’s recovery. The previously-stated 4 to 6 % turnover growth in 2016 seems unattainable, he informed everyone during a conference call, but his own position is not in danger. “I am staying. I have always said our company’s reform is not a sprint, but a marathon. We have not finished yet.”

Philips is feverishly trying to make its lighting division an independent entity and it is expected to finalize the sale of its Lumileds and Automotive departments somewhere in the first half of this year.