Sharp increase at Philips

MARY FAGAN

Industrial Correspondent

Philips, the Dutch electronics giant, reported a sharp increase in profits for 1995 but warned that sales growth may slow in 1996. The profit of 2.68bn guilders, up from 2.05bn a year earlier, was well ahead of analysts' expectations and came in spite of continuing problems in the key consumer electronics marketplace.

Jan Timmer, Philips' chairman, said that the highest income growth was in the components and semiconductors divisions, while the performance of the communications systems division and of Grundig, the German consumer electronics arm, was "most disappointing." Mr Timmer said business had been difficult in the fourth quarter of the year in some areas, with Grundig and the overall consumer electronics division hit by sluggish demand and a lack of consumer confidence. The operating profit for consumer electronics fell to 118m guilders from 449m, with Grundig having already reported a DM330m loss.

Mr Timmer said Grundig may break even by the end of next year. "We trust the necessary measures will be taken in order for Grundig to survive. But we have not given a blank cheque," he said.

Philips said 1995 income was depressed by about 700m guilders due to adverse currency movements. Sales for the year rose to 64.4bn guilders from 61bn in 1994 and earnings per share increased to 7.41 guilders from a previous 6.39 guilders. The group plans to lift the dividend to 1.60 guilders from 1.25 guilders in 1994.

Cautioning on sales prospects, the company said: "Current expectations concerning the economic environment in our major markets lead us to believe that sales growth in 1996 will continue, but not as strong as in 1995".

Mr Timmer, who is due to stand down in October, warned that the Western European consumer electronics market is still in decline and that markets are unlikely to improve substantially this year.