Philips' income slips in first quarter: No sign of improvement in Europe, says electronics giant in throes of rationalisation

CONTINUING recession in many of its main markets has caused a sharp fall in Philips' net income to 103m guilders ( pounds 37.1m) in the first quarter from 163m guilders a year ago.

The Dutch electronics group said markets in Europe showed no sign of improvement and it could not predict the impact on profits for the whole year.

Philips shed 3,600 jobs in the three months to 31 March, mainly in its consumer electronics operation. The reduction is part of a group rationalisation programme involving up to 15,000 job cuts this year.

Last year Philips made a net loss of 900m guilders after setting aside 1.2bn guilders for restructuring. The group has already axed 45,000 jobs since it began a worldwide reorganisation three years ago.

In the first quarter of 1993 lower sales and continued downward pressure in the price of consumer electronics goods were offset partly by cost control.

Nevertheless, the business made a loss of 55m guilders in the first quarter, about the same as a year earlier.

Philips achieved higher sales and profits in almost all other core operations. However, professional products and systems saw sales fall by 10 per cent, forcing the operation into a loss of 9m guilders from a profit of 128m guilders in the first quarter of last year.

The strongest performance was recorded by the semiconductors and components group, which increased sales by 5 per cent and boosted operating profit to 216m guilders from 129m guilders a year earlier.

Last week Philips said it would divest its 35 per cent stake in a loss-making semiconductor joint venture with Matsushita of Japan. Matsushita will pay around 185bn yen ( pounds 1.07bn) to buy Philips out, which will help to cut the Dutch group's 15bn guilder debt.

A further encouraging development for Philips is the approval of a joint venture with Thomson and Sagem of France in the development of liquid crystal displays for computers and television sets.

The European Commission recently gave the go-ahead to the venture, which will be called Flat Panel Displays, in an attempt to fend off competition from the US and Japan.

Philips is to hold 80 per cent of the new company, which expects to begin production by the end of this year.