Net profit slumps at electronics giant Philips due to lower sales, restructuring costs

AMSTERDAM – Royal Philips NV, the world’s biggest lighting maker, said Tuesday that its net profit slumped in 2014’s fourth quarter to 134 million euros ($ 151 million) from 412 million euros a year due to declining sales and restructuring costs.

Sales dropped two per cent to 6.5 billion euros ($7.3 billion), as a six per cent rise in sales at its consumer lifestyle division didn’t fully offset drops in turnover at the two other major divisions — lighting and health care.

Chief Executive Officer Frans van Houten said 2014 as a whole “was a setback in our performance trajectory” and added that the company remains cautious about the global economic outlook and expects “ongoing volatility in some of our end markets.”

Philips issued a profit warning earlier in the month, but investors remained disappointed by the results. Shares plunged 5 per cent on the Amsterdam stock exchange before rallying slightly to be down 4.3 per cent at 25.64 euros ($28.94) early Tuesday.

Philips, which began life as a lighting company in 1891, announced in September that it plans to split off its lighting division to create two separate companies. The move is aimed at making it easier for the lighting arm, seen as a dominant seller of LED lighting products, to break into new markets.

Philips said Tuesday that the separation will cost 300-400 million euros ($340-453 million) in 2015.