Philips blames austerity measures, eurozone crisis for huge losses

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Photo - Steve Marcus/Las Vegas Sun/Reuters

Europe’s largest consumer electronics maker recorded a huge net loss in Q4 last year thanks to the Dutch government’s austerity measures that dented its healthcare equipment business and recession that hit the sales of its lighting and construction products.

The loss of ?160 million ($210 million) comes in a stark contrast to a profit of ?465 million ($610 million) a year earlier. The company warned bleak prospects lie ahead.

“We are cautious about 2012 given the uncertainty in the global economy, and Europe in particular,” Chief Executive Frans van Houten said on Monday.

“Our fourth quarter results were impacted by weak European sales, postponement in deliveries of existing orders in our healthcare sector, and inventory correction actions and other operational issues in our lighting business.”

Philips said it lost 5% sales in Europe where the company earns almost one-third of its revenue. Many hospitals in the continent are facing a squeeze in their budgets as governments set to curtail public spending in their bid to rein in ballooning budget deficit. Many hospitals rely on latest Philips equipment for diagnosis and operations.

Draconian austerity measures adopted by the European governments and the bleak eurozone economic performance are also putting a negative impact on the fledgling construction markets and holding back planners and developers to start constructing new buildings or update the lighting systems to more energy-efficient ones in which Philips specialises.


The Dutch electronics group hoped previously announced restructuring measures, including 4,500 job cuts, will help it brave the adverse market conditions. It also forecasted some improvement in underlying margins by the end of this year, excluding the impact of further restructuring charges it expects to take.

“The first half of 2012 will see the impact of these charges and overall we are cautious about the development of the first half of the year. It is not going to be an easy first half,” Philips CEO explained.

Van Houten’s tenure, which started in April last year, has seen two profit forecasts slashed, financial targets realigned, job cuts, top executives replaced and mixed results in TV business. The company reported a $272 million loss in the fourth quarter of last year.

Philips announced it is confident that the deal with Hong Kong-based TPV Technology will get through after months of speculation. The company has been manufacturing television sets since the last 8 decades, with the first one ever produced in 1928.

The Dutch electronics giant is among the last remaining mass-market producers of televisions in Europe. Luxury manufacturers like Loewe AG of Germany and Bang & Olufsen AS from Denmark now largely occupied the niche market. Siemens and Nokia, the world?s largest maker of mobile phones, manufactured television sets before giving up production to narrow their focus.

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