Philips's Profit Drops, Forecasts Challenging Year
First-Quarter Decline Reflects Currency Losses, Lower Result from Health-Care Business
AMSTERDAM— Philips PHG +0.09% NV said Tuesday that net profit fell 14% during the first quarter as a result of currency losses and lower result from its health-care business, while it expects 2014 as a whole to be a challenging year.
Net profit for the period ended March 31 was 138 million euros ($190.5 million), compared with €161 million in the year-ago period.
Sales slipped 5% to €5.02 billion, from €5.26 billion in the first quarter of 2013. Stripping out currency effects, sales were flat on an annual basis, with growth at Philips's consumer electronics business, flat sales at the lighting business and a decline in sales at its health-care business.
"Our first-quarter financial results reflect a challenging start to the year," Chief Executive Frans van Houten said, pointing to the impact of currency losses, market headwinds in China and Russia and the effect of a voluntary suspension at the Dutch conglomerate's health-care production facility in Cleveland.
Philips, whose offerings range from kitchen appliances to hospital scanners and lighting, said it expects 2014 to be a challenging year, adding it remains confident of achieving its 2016 financial targets.
Philips aims to reduce costs by €1.5 billion by the end of next year in a restructuring and cost-cutting program it started in the third quarter of 2011, shortly after Mr. van Houten took the helm. Philips wants to increase margins to 11% to 12% for the period until the end of 2016 on average annual sales growth of 4% to 6%.