Philips Posts Surprise Profit on Cost Cuts

Updated from 1:45 a.m. EDT

AMSTERDAM (TheStreet) -- Philips Electronics(PHG Quote), the biggest consumer-electronics maker in Europe, posted a surprise third-quarter profit of 174 million euros ($256.1 million) from 57 million euros a year earlier as the company improved how it managed costs.

Sales in the quarter fell 11% to 5.62 billion euros, as demand continued to lag for consumer electronics, high-end health care equipment and lighting.

Philips, which also is the world's biggest maker of light bulbs, was estimated to report a loss of 36 million euros in the quarter on financial and restructuring charges, analysts polled by Thomson Reuters said.

Philips recorded third-quarter restructuring and acquisition-related charges of 125 million euros.

In a statement Monday, Philips said it remained "cautious about the short-term outlook in the absence of structural recovery in the majority" of its end markets.

CEO Gerard Kleisterlee said "underlying" margins -- a nonstandard term -- were "among the highest in recent years" at 6.8% of sales.

"Most businesses across the company saw further improvement in both comparable sales and underlying earnings compared to the previous quarter," Kleisterlee said.

At Philips' lighting division, sales were down 13% to 1.65 billion euros and operating profit dropped by 29% to 40 million euros.

In health care, the company said it faced reduced demand for imaging and patient monitoring systems. Stripping out the impact of acquisitions, sales fell 4% and operating profit fell 15% to 110 million euros.

Philips said uncertainty around U.S. health care reform was hurting orders, which were down 7%.

In consumer electronics, sales fell 20% to 1.82 billion euros. However, operating profit more than doubled to 126 million eueos as Philips discontinued unprofitable television lines.

-- Reported by Joseph Woelfel in New York .

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