Philips warns of halved profits

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The Independent Online
EINDHOVEN (Reuter) - Philips Electronics, the Dutch consumer giant, yesterday warned that its net profits for 1992 are likely to be half the 981m guilders (pounds 335m) achieved in 1991.

The group said that the problems in the consumer electronics industry persist and that the situation had been exacerbated by the weakness of the dollar in the third quarter of the year. Western Europe and the US are Philips' main markets.

The company's shares slumped 12 per cent, by 3 guilders to 21.80 guilders in early trade on the Amsterdam bourse.

A Philips spokesman said no single factor could be highlighted for the downward revision. This is the second time in two months that the company has lowered its 1992 net profit forecast.

The company said that the revised forecast did not include provisions for its latest round of cost- cutting, announced earlier this month, which aims to save hundreds of millions of guilders. No more lay-offs were planned.

Consumer electronics made a loss in August. Kenk Bodt, the chairman of the group's consumer electronics business, said sales in key areas in the past couple of months were flat. But he expects price-cutting to slacken off.

'In the US we can say sales are quite stable again. But Europe is still flat. We expect with the new selling season coming on, (heavy price-cutting) is off,' Mr Bodt said, referring to the pre-Christmas season. 'So I do not expect those ridiculously low prices to appear more often in the coming months.'

Mr Bodt said sales of compact disc interactive were rising. 'We may expect a strong increase in sales in the last months of this year,' he said.

Philips has never given any forecast or sales figures on CDI, but caused some concern when it cut the price in the US from dollars 999 to dollars 699 in mid-August, just a year after it first became available.

The consumer products division made operating profits of only 118 million guilders in the second quarter. After stripping out the highly profitable PolyGram music company, in which Philips has an 80 per cent stake, and personal care products like electric razors and hair-driers, the consumer electronics rump of the division is in heavy loss.