Philips Q2 Profit Jumps on Sales of TSMC Shares; More Divesting Ahead

Philips Electronics reported a quintupling of Q2 net income to €1.57b ($2.16b), or €1.43/share, helped by a €1.22b gain from selling part of its stake in Taiwan Semiconductor Manufacturing Co. [TSMC]. Earnings were mostly in-line with estimates, but a 4.4% decline in sales to €6.1b was worse-than-expected. Ordinary shares of Philips were down 1% to €32.08 in morning trading in Amsterdam. Philips blamed part of its sales decline on a weak U.S. dollar. It reiterated its forecast for 7.5% target growth in EBITA and 5% - 6% in sales for the year. Sales at its medical systems unit rose 4% to €1.65b, while revenue fell 14% to €2.15b at its consumer electronics unit due to seasonality because of World Cup Soccer last year. Philips has sold around half its 16.2% stake in TSMC amidst a planned complete exit. It intends to sell part or all of its 32.9% stake in LG.Philips LCD Co., with plans to reduce it below 20% by year-end, as a lock-up period expires this month. Philips has €1b remaining of a €4b share repurchase program it expects to finish by the end of the year.

Sources: Associated Press, Bloomberg, MarketWatch, Wall Street Journal
Commentary: 17 Ways to Invest in The Netherlands • Philips To Buy Color Kinetics For 14% Premium • Philips Plans to Sell Remaining Stake in TSMC • Philips Earnings Conference Call Transcript (later today)
Stocks/ETFs to watch: Koninklijke Philips Electronics N.V. (PHG), Taiwan Semiconductor Mfg. Co. Ltd. (TSM), LG Philips LCD Co., Ltd. (LPL). Competitors: General Electric Co. (GE), Matsushita Electric Industrial Co. Ltd. (MC), Sony Corp. (SNE). ETFs: Shares MSCI Netherlands Index (EWN), iShares MSCI Taiwan Index (EWT), BLDRS Emerging Markets 50 ADR Index (ADRE)
Related: Quarterly results and presentation [pdf]

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