Philips Healthcare income takes hit in Q4, despite sales increase

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Philips Healthcare is not exempt for falling economy. Image Source: Mashreq Bank

Royal Philips Electronics saw a net loss overall, and a slight dip in net income for its healthcare segment, for the 2008 fourth quarter, which ended Dec. 31, 2008. The company also announced plans to cut 6,000 jobs due to "weak global ecomonic conditions, asset write-downs and restructuring charges."

For the 2008 fourth quarter, Philips’ healthcare segment reported income from operations of  €301 million ($393 million U.S.) in 2008, compared to €318 million ($416 million U.S.) in 2007.

Overall, Royal Philips booked a fourth quarter net loss of €1.47 billion ($1.9 billion U.S.), compared to a net income €1.4 billion ($1.84 billion U.S.) in the same quarter last year.

The company reported that healthcare sales were up in the fourth quarter, at €2.57 billion ($ 3.36 billion U.S.), compared to €1.99 billion ($2.6 billion U.S.) last year.

“While we are very pleased with the excellent performance of healthcare, our fourth-quarter results are a reflection of both the severe impact of the global financial and economic crisis and the decisive actions taken by management,” said Gerard Kleisterlee, president and CEO of Royal Philips.

The healthcare EBITA came in at €366 million ($482 million), including €89 million ($117 million U.S.) of restructuring and acquisition-related charges, the company said.

Royal Philips said it expects the healthcare market to weaken in the first quarter, especially in the United States, and noted it would take restructuring charges of approximately €25 million ($32.7 million U.S.).

To preserve cash, Royal Philips announced it would suspend share buybacks until further notice. In addition, the company will cut about 6,000 jobs in 2009, said during a conference call, and will accelerate restructuring measures to save about €400 million ($526 million) annually from the second half of 2009, the Guardian reported. The loss was Royal Philips’ first in five years.

The company did not specify whether the job cuts would be company-wide or targeted at a particular segment.

Excluding discontinued operations, the number of employees increased by 3,300 compared to the year-ago quarter, due to acquisition-related increases at healthcare and lighting segments. These increases offset a personnel reduction of 6,051 in the consumer lifestyle sector, according to Royal Philips.