Dutch consumer electronics giant Koninklijke Philips Electronics NV (PHG,PHGFF.PK) Monday reported a loss for the second quarter as the company incurred hefty impairments amid weak market conditions. However, on an optimistic note, the company announced a share buyback program.
The Amsterdam, the Netherlands-based company reported a net loss of 1.34 billion euros (about $1.89 billion) or 1.39 euros per share for the quarter compared to a profit of 259 million euros or 0.27 euros per share in the year-ago period.
The company incurred an impairment of goodwill of 1.36 billion euros in the quarter following its annual review of business projections and discount rates.
Excluding impairments, income declined as a result of lower operating earnings and a loss of 97 million euros in discontinued operations related to the Television business.
Sales slipped to 5.21 billion euros from 5.35 billion euros in the previous year. Meanwhile, comparable sales grew 4 percent. According to the company, growth markets now represent one third of group sales.
Healthcare sales, accounting for roughly 40 percent of its total sales, edged up 1 percent and grew 8 percent on a comparable basis, driven by high single-digit growth in all businesses.
Consumer Lifestyle sales dropped 3 percent from last year and 2 percent on a comparable basis, as growth at Personal Care, Health & Wellness and Domestic Appliances was offset by a drop at Lifestyle Entertainment and Licenses.
Lighting sales fell 4 percent and contributed about 34 percent of the total sales, but comparable sales grew 4 percent, helped by a 21 percent increase in LED-based sales, while traditional lighting dropped. The company noted that profitability of the sector was hurt by tempered sales growth and margin pressure, along with higher investments in sales and marketing.
The company had warned last month that it expects Lighting segment to report low single-digit comparable sales growth in the second quarter, reflecting weaker-than-expected market conditions, particularly in the consumer sector in Western Europe and construction activity in mature markets.
Meanwhile, the company launched a share buyback program of 2 billion euros as of today, to be executed during the next 12 months.
Philips also initiated a cost reduction program of 500 million euros, which is expected to be margin-accretive from 2013. The company has also initiated investments of about 200 million euros annually towards market penetration and innovation.
Looking ahead, for the mid-term, the company targets sales growth of 4-6 percent. However, the company added that it does not "expect a material performance improvement in the near term as operational risks and issue remain, and also considering the current uncertain economic environment."
PHG closed on Friday at $24.68, up $0.49 or 2.03 percent, on 3.2 million shares.
The stock closed in Amsterdam on Friday at 17.37 euros, up 0.81 percent from the previous close.
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