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© Philips Electronics Production | June 23, 2011

Philips issued hefty profit warning

The Amsterdam-based electronics giant Philips said its lighting arm will report low, single-digit sales growth in the second quarter of 2011 and that its margins are under pressure from lower consumer spending.
Reflecting weaker than expected market conditions, especially in the consumer sector in Western Europe and construction activity in mature markets, Lighting is expected to report low single-digit comparable sales growth in the second quarter of 2011. Next to tempered sales growth and pressure on margins, incremental investments in innovation and marketing will adversely impact EBITA, which is estimated to be around EUR 85 million in the quarter (down 56% from 1Q figures).

In Consumer Lifestyle, the traditional consumer electronics market, in particular in Western Europe, is facing ongoing weak demand, declining license revenues and the impact of the TV disentanglement. This will more than offset double-digit growth in Personal Care and Health & Wellness, resulting in an expected low-single digit sales decline. Combined with the decline in license income and the increased spend in advertising and promotion, the EBITA is estimated to be around EUR 50 million in the quarter (down 58% on 1Q figures) .

Additionally, Philips will announce a company-wide cost reduction program as part of the already launched ‘Accelerate’ performance improvement program.

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